WSJ: Why Apple dropped plans to buy Intel’s modem biz

From “Apple Held Talks With Intel About Buying Its Smartphone-Modem Chip Business” ($) in Saturday’s Wall Street Journal.

Apple Inc. held talks with Intel 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 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.

My take: Why does it always have to be about Apple’s supposed appetite for big acquisitions? The company’s cash balance has been burning a hole in Wall Street’s pocket for as long as I can remember. No sign yet that Apple is taking the hint.


  1. David Emery said:
    Could this be the sequence of events:

    1. Apple and Intel talk. Intel lays down its schedule. That schedule doesn’t fit Apple’s needs.
    2. Apple settles with Qualcomm, who clearly can (technically) meet Apple’s needs
    3. Intel realizes they have no customer, and drops the cell modem product

    The idea here is that Apple got insight into Intel’s work through due diligence , and did not like what it saw there.

    April 27, 2019
    • Turley Muller said:
      I think Intel was having second thoughts for some time and was very eager to get out of the business. There had been chatter of Apple’s frustration with Intel effort’s, and my guess was Intel was reluctant to invest too heavily not seeing any path for making its money back. The Infineon business has hemorrhaged money since Intel bought it. Either Apple talked them into developing 5G model or Intel had illusions of grandeur because Intel shouldn’t have been in that business. I’m sure Apple was planning to eventually settle with QCOM, but was playing for maximum leverage. Apple can not just pay QCOM zero; that would be stealing. They wanted to opportunity to have QCOM accept a lower amount than what they claim is owed. Last year I think, QCOM said publicly that it was reducing royalty rates and capping the ASP at $500. I assume that was a bid to show that it is he one being fair and Apple and the rest are the greedy ones refusing to pay. So, Apple knew it would be getting a better deal; but held out hoping the pressure of the FTC and its own lawsuit enhance its negotiating position.

      Apple might have been anticipating it would be using QCOM regardless, and INTC too, based on the risk of using a brand new technology standard. 5G is a whole new ballgame, something I would try to avoid putting all my eggs in one basket. 5G is a mess. If I were Apple I would be in no hurry add 5G. They don’t really have a choice because the carriers will not promote or recommend devices that can’t run on the service they are selling. We’ll see.

      April 27, 2019
      • Turley Muller: “5G is a mess. If I were Apple I would be in no hurry add 5G. They don’t really have a choice because the carriers will not promote or recommend devices that can’t run on the service they are selling.”

        There you have it.

        April 27, 2019
  2. Turley Muller said:
    “reflect growing openness by the iPhone maker toward the idea of big acquisitions” — Hardly a big acquisition. Apple could likely buy the business with less than week’s worth of revenue. And it would be similar to all other acquisitions Apple has done– for the purpose of acquiring talent and IP opposed to a company’s products and customers. Apple is pretty much Intel’s only customer/product. Totally predictable that after having invested a lot money and effort in Intel’s 5G prayer, Apple would consider taking it off Intel’s hands and solely continue the project. At minimum, Apple would be interested in acquiring Intel’s wireless IP given the industry’s proclivity to sue.

    This is not indicative of Apple’s appetite for– or against making large acquisitions. WSJ is tossing in its opinion/slant to the story in line with the WS mantra- “Apple needs to make a big acquisition in order for revenue growth, yet Apple sits on its massive cash pile doing nothing while iPhone sales are in decline.” PED hit it on the head.

    April 27, 2019
  3. Fred Stein said:
    Apple has a big appetite for acquisitions, mainly Apple. We’ll soon see how much in the last quarter alone.

    Apple makes acquisitions based on long term ROI, and not to impress analysts nor to satisfy egos of anyone in Apple.

    Looking at Apple’s acquisitions of AAPL financially, it’s Alpha. The average acquisition price was less that $150 / share from the when they started. That’s over 33% appreciation for average hold time of about 3 years. The yield based on the average price is now about 9%, based on analysts forward earnings estimates. No game changer, but few pubic or private investments beat those numbers consistently,

    April 27, 2019
    • Turley Muller said:
      Indeed. Sometimes the best business to buy is more of your own.

      April 27, 2019

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