Who's Who: Winners and Losers of Apple's Truce With Qualcomm
(Bloomberg) -- The end to a battle between Apple Inc. and Qualcomm Inc. removed a hangover for shareholders. While the news led to some positive read-through for the industry, some companies may not be as fortunate.
Intel Corp.’s revenue may get hit on its decision to exit the 5G smartphone business after the settlement was announced. Yet the stock is soaring to an almost two-decade high in a sign that Wall Street may be overlooking the missed greenbacks. Meanwhile, Skyworks Solutions Inc. and Ceva Inc. tumbled.
Here’s a look at which companies could be affected and how:
The revival of Qualcomm’s relationship with Apple eventually swayed Intel’s management to hang up its efforts to dominate the 5G smartphone modem business. The decision lifted Intel shares to their highest levels since 2000 as analysts such as Cowen’s Matthew Ramsay saw the move as “an operational sigh of relief.”
Still, Cowen views the absence of about $3.5 billion revenue from the smartphone modem unit -- despite its comparatively narrow gross margins -- as a negative for the chipmaker.
Skyworks Solutions didn’t receive any of the residual love granted to Qualcomm, which won several upgrades on Wall Street. Macquarie’s Srini Pajjuri cut his outperform rating to neutral as the settlement limits Skyworks’ content expansion opportunity in 5G technologies.
The firm maintained its estimates and a $90 price-target, while saying there’s still “limited upside to the stock” with the threat of Qualcomm at Apple, according to a research note to clients. Shares of Skyworks saw their biggest intraday decline in three weeks on the heels of the downgrade.
The exit of Intel from the 5G smartphone business is also affecting its customers. Ceva, an integrated circuit supplier for mobile devices, plunged as much as 18 percent after investment firm Exane said the company’s royalty stream from Intel’s smartphone model business would fade to zero over the next three years.
The firm reduced its rating to neutral from outperform.
Though details of the Apple-Qualcomm settlement are lacking, Morgan Stanley’s James Faucette views the tie-up as a positive for Qorvo Inc. and Broadcom Inc. -- particularly if the truce “puts Apple in a better place for a 5G iPhone release in 2020.”
©2019 Bloomberg L.P.