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Semiconductor giant Intel is reportedly looking for a buyer for its connected home division, sources told Bloomberg. The division — which makes chips used for home internet access gear such as routers and gateways — generates an annual revenue of about $450 million, which would represent a little over 6% of Intel’s 2018 annual revenue. The division’s offerings compete directly against those from Broadcom and Qualcomm.
Selling off its connected home division would be the latest sign of Intel’s increasingly evident strategy to refocus its business. The company has shed several underperforming divisions in recent years in a bid to slim down operations. Here are a few examples:
- In July 2019, Intel sold the majority of its smartphone-modem chip division to Apple for $1 billion. Prior to its acquisition, the division was losing approximately $1 billion annually, according to The Wall Street Journal. Intel’s desire to sell likely escalated when Apple, which had been the largest single customer for Intel’s smartphone modems, reached a deal to get modems from Qualcomm instead. The purchase of Intel’s smartphone-modem business is expected to jumpstart Apple’s in-house production of a 5G modem for its future smartphones.
- In 2018, Intel sold embedded software unit Wind River for an undisclosed amount to investment firm TPG, according to ZDNet. Intel bought Wind River in 2009 for $884 million as part of its push to diversify into software. At the time of sale, Intel said the sale of Wind River was intended to streamline the company strategy to be more data-centric.
- In 2017, Intel sold the majority of its holdings in security software company McAfee to TPG for $3.1 billion. The relationship between Intel and McAfee resulted in a loss for the semiconductor giant — the $3.1 billion sale for 51% of McAfee represents a lower valuation than Intel’s purchase price of $7.7 billion for the whole company.
These moves are part of Intel’s broader strategy to reduce efforts within slow-growing divisions, while reallocating capital to expand operations and research in high-growth areas. The sales described above have helped Intel concentrate R&D spending within what it refers to as “double-digit growth” segments, where the high-spec requirements of hardware create room for product differentiation.
In particular, Intel has invested in AI processing technologies that can be used across segments such as big cloud, IoT, edge computing, and computer vision. IDC estimates that global spending on AI systems will reach $97.9 billion in 2023, over twice as much as the $37.5 billion expected in 2019. Intel alone expects to generate over $3.5 billion in “AI driven data-centric revenue” in 2019, according to its Q3 earnings report.
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However, Intel needs to invest heavily in research to maintain a competitive edge in this space: In 2018, Amazon followed Google’s lead in developing its own chips for cloud processing, according to Wired. These sorts of threats could push Intel out of a segment it’s banking on for future growth, especially after it ceded the mobile space to the likes of Qualcomm and Apple.
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