This New Acquisition Is Another Step in the Right Direction for Intel

Updated

It's been a busy month for Intel . Announcing the appointment of new CEO Brian Krzanich on May 2 was news in and of itself, but Intel was hardly done. Before handing the reins over to Krzanich, then-CEO Paul Otellini left a nice parting gift: The rollout of Intel's new and improved Atom processor specifically for use in mobile computing devices.

In addition to the upgraded Atom processor rollout, Intel also announced a realignment of its management structure. Now comes word the "leading semiconductor company" named in a recent press release announcing the acquisition of a STMicroelectronics and Ericsson mobile GPS joint venture was none other than Intel. When Krzanich said he was committed to the rapidly changing mobile computing market, he wasn't kidding; and that should be sweet music to the ears of Intel shareholders.

The deal
ST-Ericsson is a joint venture between STMicroelectronics and Ericsson, and has been a money-losing proposition for the two IT manufacturing giants. In Q1 of this year alone, ST-Ericsson had an operating loss of $158 million with sales of $256 million. It's no wonder STMicroelectronics and Ericsson had planned to dissolve the 4-year-old venture. Investors might wonder why Intel's interested in what has been a losing proposition.


No word on what the ST-Ericsson deal will cost, but it seems safe to assume Intel won't have to dig too deep into its $17 billion of cash and equivalents for the assets and intellectual rights. But the real potential of the acquisition is that it better aligns Intel with mobile chip leader Qualcomm, which also boasts a strong GPS navigation system for phones. Just as important as the acquisition itself is what it says about Krzanich and his plans for Intel: He's not afraid to make changes, which the most diehard of Intel bulls will agree needs to happen.

More news in May
The new Atom processor -- known as Silvermont -- could be a boon for Intel as it continues to make inroads in mobile computing. If there's an overriding complaint when it comes to mobile processors, it's battery life. Smartphones and tablets are energy hogs, and that's where Intel's new Atom processor excels.

In addition to running three times faster than the outdated Atom processor Intel's pushed for the past five years, the new-and-improved model is said to use five times less energy, according to Intel. Catching up with Qualcomm -- which claimed 43% of the smartphone applications processor market revenue in 2012 -- and its Snapdragon processor is a must for Intel, and the redesigned Atom moves it closer to becoming a reality.

Another new processor, the much-anticipated, energy-efficient Haswell unit, is scheduled for release on June 3, and could really give Intel's mobile computing efforts a shot in the arm. Acer and Hewlett-Packard, among others, are already touting new devices sporting Haswell, and you can bet there'll be more.

Krzanich has also been busy revamping Intel's management structure, too, essentially removing layers to quicken decision-making processes. The objective is to make Intel more nimble and better able to move in step with the lightning-paced mobile industry. The leadership shake-up is yet another positive step and, just as with the latest acquisition, speaks volumes about Krzanich's plans going forward.

From here
Long-suffering Intel shareholders are finally being rewarded with a nearly 18% jump in value so far this year. And coupled with its industry-leading 3.74% dividend yield, Intel offers a great growth and income opportunity.

After its nice (finally!) run, investors may wonder if it's too late to get on the Intel train. Thankfully, Intel is still sitting on the lowest trailing P/E in the sector, and as the ST-Ericsson acquisition, new processors, and management structure changes demonstrate, the best is yet to come.

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The article This New Acquisition Is Another Step in the Right Direction for Intel originally appeared on Fool.com.

Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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