Intel Corporation (NASDAQ:INTC) dominates the PC chip market, but it missed out on the mobile computing revolution. The company failed to foresee the rise of the ARM processor, which are the chips that power every “iPhone” and most “Android” devices. That lack of foresight came back to haunt INTC stock. Over the last 10 years, PC sales have slowed and so has INTC stock, growing at only 4.79% on average every year, while sales of mobile devices have skyrocketed.
But there’s more.
Former CEO Paul Otellini recently revealed in an interview with The Atlantic that the company passed on an opportunity when approached by Apple Inc. (NASDAQ:AAPL) to supply chips for its yet to be unveiled iPhone back in 2007. (Source: “Paul Otellini’s Intel: Can the Company That Built the Future Survive It?” The Atlantic, May 16, 2013; http://www.theatlantic.com/technology/archive/2013/05/paul-otellinis-intel-can-the-company-that-built-the-future-survive-it/275825/.)
In another interview with Fortune, Intel President Renee James said that the company “didn’t appreciate that the iPhone was the advent of mobile and ultra mobile computing.” (Source: “Intel President: Why we missed the mobile revolution,” Fortune, July 14, 2014; http://fortune.com/2014/07/14/intel-president-why-we-missed-the-mobile-revolution/.)
Intel must have been kicking itself later, as that lack of appreciation for the iPhone prevented them from becoming a major player in the mobile device market.
But it looks like Intel may be back in a big way, which will be a major positive for INTC stock.
According to CLSA Securities analyst Srini Pajjuri, Intel will be inside the “iPhone 7.” Pajjuri has corroborated multiple reports claiming that Intel will supply LTE modems for the next iPhone and that the chipmaker has secured a significant portion of those LTE chips—about 30%–40% of production. QUALCOMM, Inc. (NASDAQ:QCOM) will likely supply the rest of the chips. (Source: “Intel to Produce ‘Significant Portion’ of LTE Modem Chips for iPhone 7,” MacRumors.com, March 4, 2016.)
Intel already reportedly has about 1,000 or more employees who have been working on preparing the Intel “7360” LTE modem for the iPhone 7 since last October. (Source: “Intel has 1,000 people working on chips for the iPhone,” Venturebeat.com, October 16, 2015; http://venturebeat.com/2015/10/16/intel-has-1000-people-working-on-chips-for-the-iphone/.)
Intel’s 7360 LTE modem chip supports theoretical downlink speeds of 450 megabits per second and uplink speeds of 100 megabits per second, which is a big improvement over Qaulcomm’s “MDM9635,” which is currently inside the “iPhone 6s” and “iPhone 6s Plus.” The MDM9635 supports downlink speeds of up to 300 megabits per second and uplink speeds of 50 megabits per second. That means that with the iPhone 7, you’ll have faster speeds for browsing the Web, downloading apps, and streaming videos.
So what does this mean for Intel and investors in INTC stock?
If the report is true, Intel stands to benefit in a huge way. Pajjuri noted that the opportunity for Intel will bring in $1.0 billion in revenue. (Source: “iPhone 7: Intel Corporation To Power 30 To 40 Percent of iPhones,” ValueWalk, March 4, 2016; http://www.valuewalk.com/2016/03/intel-power-30-40-iphone-7-report/.)
Credit Suisse analysts are also re-hashing the same sentiment. The analysts noted that if Intel has 30% share of production in 2017, revenue would be about $815 million, with about $489 million in operating income. Approximately $0.08 in earnings per share would be added to INTC stock. (Source: “Intel May Grab Up to 30% Share in IPhone 7 Modem,” Barron’s, March 11, 2016.)
The Bottom Line on INTC Stock
This is a big win for Intel and if the company wants its modem business to succeed, it really needs this deal, since Apple is the only major smartphone maker that doesn’t make its own modem. The deal will also make up for Intel’s past mistakes and revive its staid mobile business. Investors may want to take a look at INTC stock.