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Apple Might Scoop Up Thousands of Intel Patents in Pursuit of 5G Modem

Evan Niu, CFA, The Motley Fool

"5G continues to be a strategic priority across Intel, and our team has developed a valuable portfolio of wireless products and intellectual property," Intel (NASDAQ: INTC) CEO Bob Swan said in a statement earlier this year when the company revealed it was exiting the 5G modem business. "We are assessing our options to realize the value we have created, including the opportunities in a wide variety of data-centric platforms and devices in a 5G world."

That news came just hours after Apple (NASDAQ: AAPL) announced its surprise settlement with Qualcomm (NASDAQ: QCOM), a supplier it had spent over two years battling in courts around the world. Last month, Intel kicked off an auction for all those patents, and Apple has emerged as a probable buyer as part of its ongoing effort to develop an in-house 5G modem.

Illustration of 5G connections throughout a city

Image source: Getty Images.

Going once, going twice

IAM reports that Intel has entered into exclusive talks with an unnamed buyer that is very likely none other than Apple, closing off the auction to other potentially interested parties, some of whom received an email from Intel licensing exec James Kovacs this week. That message said the new situation "precludes further engagement with other bidders at this time," according to the report. If talks with that unnamed bidder fall through, the auction could potentially reopen to other parties.

The mobile portfolio that Intel is looking to sell comprises approximately 8,500 patents related to wireless technologies including 3G, 4G, and 5G, as well as related implementation methods. Apple had spent years collaborating with Intel in developing 5G modems, but the project was plagued by ongoing technical challenges and delays, according to a report in May from The Information.

That also likely means that Apple is at least loosely familiar with the IP that Intel was developing, while also having arguably the greatest vested interest in accelerating its 5G timeline. After years of disparaging Qualcomm for alleged anticompetitive practices -- which were largely validated by a separate legal victory by the Federal Trade Commission -- it's become abundantly clear that Apple utterly loathes doing business with Qualcomm.

The Mac maker would undoubtedly prefer to extricate itself from any relationship with the mobile pioneer, but that's far easier said than done given Qualcomm's pervasive grip on wireless technologies, as well as the broader market for baseband chips. Apple had little choice but to mend its relationship with Qualcomm in order to launch a 5G iPhone, which is expected to happen next year.

Apple could also easily purchase the patents with its massive cash hoard, whereas Intel dealing with other potential buyers such as consortiums or smaller bidders could be more time-consuming and/or complicated in terms of financing. Apple buying up all that IP would be the best outcome for everyone involved, allowing Intel to unload the patents expeditiously while accelerating Apple's 5G road map.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.