Billions of dollars were made and lost this week as the biggest game of technology in poker came to an end. Tuesday Apple and Qualcomm that reached a six-year patent licensing agreement and a multi-year deal for Qualcomm to supply communications chips to Apple. Qualcomm ended the week with a staggering 40% share gain. Apple also benefited, with shares up 2,5% in a week.
In the long term, however, the deal may have the strongest impact on a company that was not directly involved in the negotiations. Intel hours after Apple and Qualcomm announcement about leaving the 5G modem business. Oddly enough, during the same week, Intel shares rose by 3,7%. For years, Intel has struggled to grow the wireless modem business, investing in it while pushing the PC and server processor families. But even as the only modem supplier for the Apple iPhone, Intel never made a lot of money from the modem business (which, in addition, turned out to be one of the factors that created the 14nm CPU shortage).
βWe are very excited about the possibilities of 5G and the evolution of cloud network services, but in the smartphone modem business, it has become clear that there is no clear prospect of profitability and positive results,β wrote Intel CEO Bob Swan in a keynote. Wall Street has only welcomed Intel's decision because it will allow the company to focus on the more lucrative x86 chip business.
"Intel has become a more focused company, this decision seems to be a more disciplined approach," said semiconductor industry analyst David Kanter of Real World Insights. He also noted that with the previous management, the company preferred to invest in obviously unsuccessful projects for years, despite the obvious futility.
Last month, chip market analyst Joseph Moore of Morgan Stanley said in a column that he believes Bob Swan is more disciplined than previous Intel executives, and this will eventually lead to a rise in the value of the company's shares. Intel's exit from the 5G modem business was a confirmation of the thesis. βThis is the right business decision; the fact that they did it so quickly tells me that they will continue to make the right decisions and be more disciplined than in the past,β Mr. Moore said on Thursday. A positive market reaction, in his opinion, will convince them of the correctness of this direction. Joseph Moore now values ββIntel shares at $64 versus $58,49 in real terms.
Perhaps the biggest unanswered question so far is: who initiated what happened: Apple or Intel? Both companies declined to comment or provide clarification on the matter. New Street Research analyst Pierre Ferragu believes that both companies are guilty of ending cooperation: βWhen a couple gets divorced, is he or she at fault? A bit of both sides."
Whatever the reason, Mr. Ferrago is optimistic about the future of Intel. He predicts that the chip maker will be able to increase its annual free cash flow to $20 billion a year in two years (the company is forecasting $16 billion this year). He believes that Intel's exit from the modem business will result in $ 1 billion in savings, it will save more than $ 1 billion in connection with the potential reduction in non-core expenses of its business, and $ 2 billion - by reducing capital expenditures.
However, the prospects for Intel are not cloudless. The manufacturer's core business is facing a resurgence of AMD, and it is likely that Intel will lose market share due to the release of more competitive 7nm Zen 2 processors this year. But now Intel will be able to pay close attention to its core business and make more informed financial decisions. This, apparently, pleases the shareholders of the company.
Source: 3dnews.ru