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Instant Analysis: Intel Corporation May Sell $1 Billion In Venture Capital Assets

By Leo Sun – Mar 18, 2016 at 3:30PM

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Why does the chipmaker want to sell a quarter of its investment portfolio?

Intel (NASDAQ: INTC) is looking to sell some of its investment made through Intel Capital, its venture capital unit, for as much as $1 billion, according to a recent Bloomberg report. The chipmaker is reportedly working with UBS Group AG (NYSE: UBS) to find potential buyers for the assets.

Source: Intel.

How big is Intel Capital?
Intel started Intel Capital in 1991, and the unit has since invested around $11.6 billion in over 1,440 companies across 57 countries. Last year, it invested $514 million in 143 companies, with roughly half spent on new ventures and the other half allocated to follow-on investments. Its current "active" portfolio consists of 430 companies, and Intel reportedly wants to sell about a quarter of those investments.

In January, Intel restructured its venture capital unit after President Arvind Sodhani retired. Wendell Brooks, the head of mergers and acquisitions, replaced Sodhani and unified the venture capital and M&A teams under a single team. Discussions regarding the sale are still in the early stages, but Intel is reportedly willing to sell the assets as a whole or divided up by geographic region or sector. In a February blog post, Brooks stated that Intel could still invest up to $500 million into Intel Capital per year. It's unclear if that figure will decrease after the sale.

Intel isn't the only chipmaker with a venture capital arm. Mobile chipmaker Qualcomm (QCOM -0.42%) established Qualcomm Ventures in 2000, and now holds 214 investments in 158 companies. One of Qualcomm Ventures' smartest investments was buying a stake in Xiaomi in 2010, which eventually became one of the top smartphone makers in China.

Should Intel investors be concerned?
Intel likely wants to sell some of its VC assets because they don't fit in with the chipmaker's core priorities of PC, mobile, data center, Internet of Things, and non-volatile memory technologies. This isn't the first time Intel has culled Intel Capital's portfolio -- it did the same thing in 2002 and 2003 following the dotcom bust.

Therefore, investors should consider this a positive development which will keep Intel's investments focused while providing it with more cash for R&D. However, this sale won't likely move the needle for Intel, which is mainly dependent on the growth of its PC and data center chip businesses.

 

Leo Sun owns shares of Qualcomm. The Motley Fool owns shares of and recommends Qualcomm. The Motley Fool recommends Intel. 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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