Intel to Supply Apple Phones; Sell Security Stake
Apple is using wireless chips from Intel Corp (NASDAQ: INTC – $36.33) in some models of the new iPhone 7, a widely expected breakthrough in the chip giant’s multiyear quest to find a foothold in popular smartphones. The company’s baseband modem chips are a replacement for those sold by long-time Apple supplier Qualcomm. Some industry observers believe that Intel could wind up supplying chips for as much as half the handsets Apple is likely to sell. Intel has been racing to catch up in mobile and tablet devices in an attempt to reduce its dependence on the slowing personal computer market. Separately, Intel said it would spin out its cyber security division, formerly known as McAfee, and sell a majority stake in it to investment firm TPG for $3.1 billion in cash. TPG will own 51 percent of the new entity, valuing the entire company at $4.2 billion including debt. Intel, which bought McAfee for $7.7 billion in 2011, will retain a 49 percent stake in the business. The deal ends a failed effort by Intel to stake out a major position in the computer security business.
Intel shares, testing their recent 52-week high, offer good 3- to 5-year total return potential, particularly when accounting for risk. Conservative income accounts should also note the company’s solid and increasing dividend. Including the $1.04 payout yielding 2.8%, INTC has returned 24% to investors over the past twelve months.