Intel To Dispose Of Embedded Software Unit To TPG Capital

Chipmaker Intel is disposing of Wind River, an embedded software unit that it acquired close to a decade ago at a price of $884 million, to TPG Capital, a private equity firm. TPG Capital was also the buyer of Intel’s computer antivirus business, McAfee, which it acquired at a price of $4.2 billion. According to Intel the move is designed to sharpen the focus on the growth opportunities which are in alignment with the company’s data-centric strategy.

Wind River was purchased by Intel in 2009 and the acquisition came at a time when the chipmaker was concentrating on diversifying its business into Internet of Things and embedded services. According to the senior vice president of the IoT Group at Intel, Tom Lantzsch, the chipmaker will continue to collaborate with Wind River.

Ecosystem partner

“Wind River will remain an important ecosystem partner, and we will continue to collaborate on critical software-defined infrastructure opportunities to advance an autonomous future. We expect this transition will be seamless for our mutual customers and partners,” saidLantzsch.

After the deal the president of Wind River, Jim Douglas, will head the independent firm. According to Douglas TPG Capital will be in a position to offer the software firm more financial resources compared to Intel. The deal is expected to close in this year’s second quarter.

Stock downgrade

This comes in the wake of a Wall Street firm downgrading the stock of Intel to ‘hold’ from ‘buy’. Despite the downgrade Stifel maintained a price target of $53 for Intel. The downgrade followed reports that the partnership between Apple and Intel was threatened since the former was allegedly planning to develop its own chips for Mac computers.

According to Kevin Cassidy, an analyst at Stifel, the stock of Intel which has appreciated by around 35% since the Xeon Scalable Architecture was unveiled last year in July no longer possessed any compelling value. Per Cassidy the upgrade cycle of Xeon Scalable Architecture was likely to peak in the second half of this year.

Another Wall Street firm, Bernstein, has also warned that Intel stands to lose revenues of approximately if Apple starts making its own chips for its Mac computers. This would represent between $0.30 and $0.40 of earnings per share. Per Bernstein the bigger risk was not even the loss of revenues but the fact that the move by Apple could have a domino effect leading to other customers of Intel deciding to make their own chips.




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