Intel (INTC - Free Report) recently ended its search for buyer for its Home Gateway Platform Division — a unit engaged in manufacturing chips used in home internet access gear that enable wireless connection — in MaxLinear (MXL - Free Report) .
The all-cash deal is valued at $150 million and is subject to regulatory approvals and other customary closing conditions. The divestiture is expected to conclude in third-quarter 2020.
The connected home unit has been part of Intel’s Client Computing Group (CCG) that registered sales of $10.01 billion in fourth-quarter 2019, up nearly 1.9% year on year.
MaxLinear anticipates the deal to be immediately accretive to revenues and expand its total addressable market or TAM by $6.4 billion. Shares of MaxLinear were up 31.5% on Apr 6, eventually closing at $14.1.
Nevertheless, Intel faced stiff competition in connected home business from Broadcom and Qualcomm.
We note that Intel’s CEO, Bob Swan, is exploring options for less competitive areas, and the latest deal is a testament to the same. The divestiture is expected to aid the chipmaker prioritize delivery of high-performance PC platforms and strengthen its CCG segment.
Notably, on a year-to-date basis, shares of Intel are down 2.5%, compared with the industry’s decline of 1.6%.
Commitment to Shedding Competitive Businesses
Markedly, in December 2019, Intel concluded the divestiture of majority of its smartphone modem business to Apple (AAPL - Free Report) for nearly $1 billion.
However, in the brief filed by the chipmaker in support of the Federal Trade Commission states that Intel was compelled to sell off its smartphone modem business “at a multi-billion dollar loss”, owing to Qualcomm’s anti-competitive behavior.
Swan has also pointed out that Intel’s memory business has been sluggish and might consider seeking a partner for the same.
Focus on Other Prospective Business Areas
Intel’s latest move of divesting Home Gateway Platform Division business highlights its intention to move away from less lucrative areas and focus on other prospective business areas like the Data Center Group (DCG). In fact, the company is committed toward exploring opportunities for its cloud and comms division, which is part of DCG.
Further, the company’s investments in field programmable gate array (FPGA) to reduce latency and increase speeds are helping it develop custom solutions for big players. Further, the inclusion of Altera and eASIC is aiding the company to fortify its position in the networking space.
Intel is also striving to boost presence in the supercomputing and quantum computing market. Such efforts along with enterprise upgrades and new products are likely to consistently aid the company in maintaining its leading presence in the semiconductor product arena.
Moreover, robust mix of high-performance second-generation Xeon Scalable processors and solid demand from Cloud service providers is expected to drive growth.
Meanwhile, Swan continues to strengthen Intel’s data-centric business and his stringent stance on finances is worth mentioning.
We believe these initiatives will aid the chipmaker in sustaining competitive position in the semiconductor market against peers, including Advanced Micro Devices (AMD - Free Report) and NVIDIA.
Currently, Intel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
(We are reissuing this article to correct a mistake. The original article, issued on Apr 7, 2020, should no longer be relied upon.)