Intel sells smartphone modem biz to Apple for $1B

Intel will sell the majority of its smartphone modem business to Apple for $1 billion as expected, the two companies announced Thursday.

Intel also announced its second quarter revenue of $16.5 billion, down 3% over the second quarter last year but ahead of Intel’s April guidance. Net income was $4.2 billion, down 17% from last year.

The chipmaker raised its revenue outlook for all of 2019 to $69.5 billion, up $500 million from its April guidance. Intel’s stock price jumped 5% on its earning news in after-hours trading to $55.05.

Even with the positive outlook for the latter half of the year, Intel executives raised concerns along with other chipmakers that tariffs on goods traded with China will increase. “It’s still a little bit unknown about how this China thing will play out, and that’s a big important market for us and that makes me a little more anxious,” Intel CEO Bob Swan said on a call with analysts.

The deal with Apple will mean about 2,200 Intel workers join Apple along with IP, equipment and leases. The transaction is expected to close in the fourth quarter of 2019.

Apple will have 17,000 current and future wireless technology patents after the deal, but Intel will retain the ability to develop modems for nonsmartphone apps, including for PCs, IoT devices and autonomous vehicles.

Swan said the agreement will allow Intel to focus on technology for 5G networks and still hold onto critical IP.

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The biggest weakness in Intel’s second quarter was revenue from its enterprise and government segment, which was down 31% year over year. “CIOs broadly speaking are a little more cautious as we go into the second half of the year, and when we take China into account, China is even worse,” Swan said.

Intel’s 7nm chips will launch in 2021, providing a 2x improvement over 10nm chips and putting Intel on pace with Moore’s Law for scaling processors, Swan said. The company previously committed to that timeline in May. AMD has already announced 7nm products, including its Navi GPU that will be shipping this year.