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Intel (INTC) Directed to Pay $2.18B Fine After Losing Patent Case

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Intel Corporation (INTC - Free Report) recently was ordered by a federal court in Texas to shell out $2.18 billion in damages to VLSI Technology in a patent infringement case, per a Bloomberg report.

The federal court ruled that Intel infringed two of VLSI’s patents. The court further directed the chipmaker to pay $1.5 billion in damages for infringing the first patent and $675 million for infringing the second patent to VLSI Technology.

Further, Bloomberg added that Intel’s lawyer intimated the court that VLSI’s lawsuit against Intel was its only potential to earn revenues as the company was established just four years ago and has no products. Moreover, patents were owned by NXP Semiconductors and as a result that company would also get a share of the damages awarded. Intel stated that compensation paid to VLSI could not be more than $2.2 million.

Intel Corporation Price and Consensus


Intel Corporation Price and Consensus

Intel Corporation price-consensus-chart | Intel Corporation Quote


Earlier, Intel had requested to postpone the lawsuit due to the coronavirus crisis. However, the chipmaker’s plea was denied by a federal judge.  

Intel said that it will appeal against the jury’s verdict. Shares of Intel fell 2.61% to close at $61.24 on Mar 2. In the past year, shares of Intel have returned 4.4% against the industry’s rally of 42.7%.

Intel’s Woes

The hefty compensation could have serious ramifications for Intel. The company, which has dominated the chip market, has been in trouble for quite some time now.

Intel is witnessing intensifying competition in the server, storage and networking markets from the likes of Advanced Micro Devices (AMD - Free Report) and NVIDIA (NVDA - Free Report) . NVIDIA is strengthening its position in the GPU used in AI applications’ domain while AMD is fast capturing market share in the lucrative core PC and data center CPU markets.

Moreover, Intel’s production delays pertaining to 7 nanometer (nm) ramp up are deeply concerning.

Intel’s rising debt levels are an added concern. As of Dec 26, 2020, cash and cash equivalents, short-term investments and fixed-income trading asset balance were $23.89 billion, while total debt was much higher at $36.40 billion.

What Lies Ahead?

Intel, which flaunts Zacks Rank #2 (Buy), stands to gain from increasing demand for its 10 nm SuperFin process-based 11th Gen core processors, triggered by coronavirus-induced remote work and online learning wave amid robust traction witnessed in PC market.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chipmaker started shipping its first 10 nm based Xeon Scalable CPU (labeled Ice Lake) and intends to boost production volume through the first quarter of 2021.

These new processors will aid clients across cloud, network, and edge domains to augment performance leveraging Intel’s expertise in next generation Optane Persistent Memory, PCIe Express Gen 4 and Software Guard Extensions (SGX) security enhancements.

Further, Mobileye growth is anticipated to be driven by design win momentum and a recovering automotive industry through 2021. In the last reported quarter, Mobileye revenues improved 39% on a year-over-year basis to $333 million.

Also, changes in Intel’s top leadership are expected to help the company navigate troubled waters. In Feb 2021, CEO Bob Swan stepped down from his role and Pat Gelsinger took up the responsibilities. Gelsinger earlier worked with Intel for three decades and recently served as the CEO of  VMware (VMW - Free Report) from 2012.

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