Apple acquires Intel’s modem business in $1 billion deal
Mobility
Apple has agreed to acquire Intel's 5G modem business in an acquisition that highlights the iPad and iPhone maker's desire to have more direct control of its supply chain.
On July 25, at the same time that Intel released its Q2 2019 earnings report, Apple announced the deal, worth $1 billion.
No further financial information has been disclosed.
Under the terms of the agreement, roughly 2,200 engineers will move from Intel to Apple, of which forms of the majority of Intel's modem business.
Apple will also acquire a range of patents, bringing the tech giant's count up to over 17,000 patents related to wireless technologies, cellular standards, and modems.
"Intel will retain the option to develop modems for non-smartphone applications, such as PCs, Internet of Things devices and autonomous vehicles," Apple says.
Rumors of a potential acquisition surfaced earlier this week. Reports suggested that a deal could be worth $1 billion or more, and the companies had recently entered "advanced" talks after on-and-off discussions over a year.
By offloading the modem group -- a wise decision considering Intel has previously revealed its plans to leave the 5G mobile modem development business -- the company could potentially save up to one billion dollars a year in operational expenditure. Intel previously said that there was "no clear path to profitability [or] positive returns" in the 5G modem space.
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Apple, in contrast, has purchased a ready-made modem specialist team and patents which could, one day, reduce its reliance on Qualcomm as a component supplier for iPhone chips.
The deal is expected to close in the fourth quarter of 2019, pending regulatory approval.
"This agreement enables us to focus on developing technology for the 5G network while retaining critical intellectual property and modem technology that our team has created," said Bob Swan, Intel CEO. "We have long respected Apple, and we're confident they provide the right environment for this talented team and these important assets moving forward. We're looking forward to putting our full effort into 5G where it most closely aligns with the needs of our global customer base, including network operators, telecommunications equipment manufacturers, and cloud service providers."
Goldman Sachs and Co LLC served as Intel's financial advisor, while Skadden, Arps, Slate, and Meagher and Flom LLP acted as legal advisors.
At the same time that Apple revealed the deal, Intel reported second-quarter 2019 financial results, which included revenues of $16.5 billion GAAP and basic earnings per share of $0.92. The company's non-GAAP earnings per share were reported at $1.06 in Q2 2019.