Intel (INTC), which for a long time has dealt directly with Apple (AAPL) in producing its iPhone modems, is now on the verge of selling its smartphone modem chip business to Apple for around $1 billion.
In an interview held before news broke of the sale, Intel CEO Bob Swan explained to Yahoo Finance’s editor-in-chief, Andy Serwer, why Intel no longer believes in its modem for smartphones.
“We are exiting the modem for the smartphone,” Swan said. “We concluded that in the modem for the smartphone, where we really only had one customer, that the likelihood and the probability that we were going to be able to make money was just not there as we look forward in light of the dynamics of the market.”
The sale — which Intel confirmed when it reported earnings on Friday — will allow Apple to directly control more of the production of one of its premier products.
Concerns likely existed at Apple that as Intel made the decision to wind down its production of modems, Apple would be increasingly beholden to Qualcomm (QCOM) for the production of its units. The two companies have sparred in the past, and just reached a settlement in a suit over patent licensing. Swan believes his modem business no longer has a path to profitability, but he may still be able to get $1 billion from Apple for his troubles.
Swan made his comments in a conversation that aired on Yahoo Finance in an episode of “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.
“We try to use three criteria on technology inflections and investments we'll make,” Swan told Serwer. “One, we want to be a leader in technology inflections that really matter. Two, that it helps us play a bigger and broader role in our customer success. And three, we can make money for our shareholders.”
In its earnings release on Thursday, Intel beat analysts’ expectations on the top and bottom line.
Calder McHugh is an Associate Editor at Yahoo Finance. Follow him on Twitter: @Calder_McHugh.