(Bloomberg) -- Investors are cheering Intel Corp.’s decision to hang up on the 5G smartphone modem business, sending shares toward the highest level since the dot-com boom of 2000. The move, which follows the settlement of drawn-out patent disputes between Apple Inc. and Qualcomm Inc., suggests to Cowen analyst Matthew Ramsay that Intel is now “breathing an operational sigh of relief.”
Here’s what Wall Street is saying:
Cowen, Matthew Ramsay
“No longer having to service Apple could accelerate potential cost-cutting initiatives and we anticipate an update on Intel’s cost savings from its 5G smartphone modem exit at its May 8 analyst day.”
Cowen views the $3.5 billion revenue hit to Intel with out the smartphone modem business as a negative, but says the unit was well below corporate average gross margins and was likely still materially unprofitable.
Market perform, price target $50
Macquarie, Srini Pajjuri
“On the positive side,” Pajjuri writes in a note, the exit of the 5G smartphone modem business should help margins and improve management’s focus on the core personal computer/server business.
The firm anticipates “modest EPS implication” and models $2.5 billion in revenue for 2020 with less than $0.10 EPS contribution.
Outperform, price target $62
Credit Suisse, John Pitzer
Credit Suisse sees “little risk” to Intel’s 2019 revenue from Apple because modem sockets are determined nine to 12 months in advance.
Pitzer says the settlement of the Apple-Qualcomm dispute presents potential for meaningful share loss in 2020, especially in the second-half of the year as Apple ramps 5G SKUs.
Outperform, price target $58
Deutsche Bank, Ross Seymore
Intel “does not expect to launch 5G modem products in the smartphone space in 2020 as originally planned.” But beyond smartphones, Intel does plan to conduct an assessment of opportunities for 4G/5G modems in a variety of devices including personal computers, Internet of Things and other data-centric devices.
Seymore highlights that Intel plans to meet existing 4G commitments, but he reminds investors that older generation iPhones can sell for as many as 2-3 years after they are initially released. However, “supporting older iPhones 4 or 5 years later would be surprising to us.”
Maintains buy rating
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