Apple Discussed Acquiring Intel's Smartphone-Modem Chip Business

By Tripp Mickle, Cara Lombardo and Dana Cimilluca 

Apple Inc. held talks with Intel Corp. about acquiring parts of its smartphone-modem chip business, according to people familiar with the matter, a potential multibillion-dollar deal that would accelerate the iPhone maker's efforts to develop wireless technology for its devices.

The talks started around last summer and continued for months before halting recently, around the time Apple reached a multiyear supply agreement for modems from Intel rival Qualcomm Inc., some of the people said.

Intel is now exploring strategic alternatives for its modem chip business -- including a possible sale -- to Apple or another acquirer, the people said. It has already received expressions of interest from a number of parties and has hired Goldman Sachs Group Inc. to manage the process, which is in an early stage. Should there be a deal, it could yield as much as a few billion dollars for Intel, some of the people said.

The Intel-Apple talks, which haven't been previously reported, reflect growing openness by the iPhone maker toward the idea of big acquisitions, people familiar with the company's operations said. The talks also are part of broader tumult in the smartphone sector as sales growth has stalled, squeezing the iPhone business that has long driven Apple's profits.

Apple's supply deal with Qualcomm -- previously the sole supplier of iPhone modems -- was part of the resolution of a two-year legal fight over Qualcomm's royalties for wireless technology. Intel had gained the iPhone business as that feud worsened, then announced after the settlement that it was abandoning development of modems for 5G smartphones.

Asked in an interview Thursday whether Intel is considering selling the 5G smartphone modem business, Chief Executive Bob Swan said it is "evaluating alternatives on what's the best course for our IP and our people." He spoke after Intel lowered its financial expectations for the year, which sent Intel's stock plunging by about 10% Friday, one of its worst drops in years.

Selling the modem business would allow Intel to unload a costly operation that was losing about $1 billion annually, according to another person familiar with its performance. Any sale would likely include staff, a portfolio of patents and modem designs related to multiple generations of wireless technology, said Patrick Moorhead, principal at Moor Insights & Strategy, a technology firm.

Besides Apple, other potential buyers could include Broadcom Inc., ON Semiconductor Inc., Samsung Electronics Co., or China's Unisoc Communications Inc., which is working on 5G modems, Mr. Moorhead said.

"For Intel, the clock is ticking," Mr. Moorhead said. "It's not pouring more money into this business, so the value goes down with every second."

Apple has been reluctant to cut big deals in the past, preferring to acquire about 15 to 20 small companies annually that have technology it can easily integrate into future businesses. Its biggest deal -- a $3 billion acquisition of Beats Electronics LLC in 2014 -- helped the company jumpstart its music-streaming business, but almost all of the Beats senior leadership departed.

--Asa Fitch contributed to this article.

(END) Dow Jones Newswires

April 26, 2019 14:44 ET (18:44 GMT)

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