What Buying Intel's Modem Business Could Mean for Apple

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Apple's (AAPL) - Get Apple Inc. (AAPL) Report impending acquisition of Intel's (INTC) - Get Intel Corporation (INTC) Report modem business has several key implications, one of which is not the best news for Qualcomm (QCOM) - Get QUALCOMM Incorporated Report

The deal, if it happens, would be a $1 billion by Apple for the tech behemoth to use the modem's to build out its 5G iPhone for 2020. 

Here are three key points. 

Apple and 5G

Apple is clearly "doubling down" on its 5G iPhone build out, as noted by WedBush Securities Dan Ives in a note. Apple, Samsung and other smartphone players are racing to make the best 5G devices, and some analysts have mentioned this race, in which Apple's 5G model won't be released until 2020, would pressure 2019 iPhone sales. While that may be true, the acquisition does enable Apple to build out its 5G model in a controlled and tailored way. 

Apple and M&A

"For Cook, doing an acquisition of $1 billion would be a change in tune around larger M&A, as we continue to strongly believe this is the start of a much more aggressive Apple going forward on the acquisition front," Ives said. Apple is known for staying away from acquisitions. It acquired Beats headphones many years ago. 

Qualcomm Implications 

Qualcomm (QCOM) - Get QUALCOMM Incorporated Report was losing more than 1%, falling to $75.04 a share in premarket trading, as Apple's clear intent to use Intel's modem's likely means fewer purcahses of Qualcomm's chips. "AAPL building its own modems would certainly weigh on future QCOM revenues, particularly given AAPL's propensity to fully replace 3rd party suppliers when internal parts prove adequate," Ives said. 

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