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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Intel Corporation    INTC

INTEL CORPORATION

(INTC)
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Real-time Estimate Quote. Real-time Estimate Cboe BZX - 12/02 01:44:01 pm
49.825 USD   +0.53%
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Intel's SK Hynix Deal Will Make Good Memories -- Heard on the Street

10/20/2020 | 07:22am EST

By Jacky Wong

Intel's origin as a memory-chip company is already a distant memory. Its latest deal just confirms that--and brings much-needed consolidation to the industry.

Intel has agreed to sell its NAND flash memory-chip business to South Korea's SK Hynix for about $9 billion, including its manufacturing facilities in China's Dalian. The unit makes NAND memory chips, which are used in storage from smartphones to computers. Intel will keep its small Optane business, which makes advanced memory chips used in data centers.

The deal makes sense for both parties. Intel gets cash to reinvest into its core central-processing-unit business, which is struggling to mass produce its most advanced chips. It will also exit a low-margin business that requires massive capital investment. Intel is only the sixth largest player in NAND, lacking the scale to compete with market leaders such as Samsung Electronics. It also got a good price: The deal values Intel's NAND business at 1.7 times sales, compared with 1.1 times enterprise value to sales for Western Digital, according to analysts at Cowen.

For SK Hynix, the deal will help it to narrow the gap with Samsung. SK Hynix and Intel combined had about 23% of the NAND market in the second quarter, according to Taiwanese research firm TrendForce. The transaction would put it ahead of Kioxia's 17% and just behind Samsung's 31%. SK Hynix will also get a bigger piece of the pie in the more lucrative enterprise solid-state drives. More than 60% of SK Hynix's NAND revenue comes from the mobile market, which is more price-competitive, according to TrendForce. It may also sell its new products alongside its DRAM chips, used in processing.

The deal also sparks hopes for even greater consolidation in the NAND industry, as has already happened in DRAM. Western Digital jumped 8% Monday while Toshiba, which owns about a 40% stake in Kioxia, rose 4% Tuesday. Competition in DRAM is less intense as the market is effectively dominated by only three players: Samsung, SK Hynix and Micron.

The NAND market, in contrast, still had six major players before the deal. With one less player, the market expects less intense competition and better margins while some smaller players may also be bought.

Not all acquisitions make sense--especially in this era of dizzying tech valuations--but for Intel and SK Hynix, this deal looks likely to compute.

Write to Jacky Wong at JACKY.WONG@wsj.com

(END) Dow Jones Newswires

10-20-20 0721ET

Stocks mentioned in the article
ChangeLast1st jan.
INTEL CORPORATION 0.58% 49.835 Delayed Quote.-19.21%
SAMSUNG ELECTRONICS CO., LTD. 2.51% 69500 End-of-day quote.24.55%
SK HYNIX, INC. 8.46% 109000 End-of-day quote.15.83%
TOSHIBA CORPORATION 2.50% 3030 End-of-day quote.-18.22%
WESTERN DIGITAL 0.61% 47.57 Delayed Quote.-25.52%
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Financials (USD)
Sales 2020 75 333 M - -
Net income 2020 19 309 M - -
Net Debt 2020 21 979 M - -
P/E ratio 2020 10,9x
Yield 2020 2,68%
Capitalization 203 B 203 B -
EV / Sales 2020 2,99x
EV / Sales 2021 3,05x
Nbr of Employees 110 800
Free-Float 99,9%
Chart INTEL CORPORATION
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Technical analysis trends INTEL CORPORATION
Short TermMid-TermLong Term
TrendsNeutralBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 43
Average target price 54,11 $
Last Close Price 49,56 $
Spread / Highest target 102%
Spread / Average Target 9,17%
Spread / Lowest Target -27,4%
EPS Revisions
Managers
NameTitle
Robert Holmes Swan Chief Executive Officer & Director
Omar S. Ishrak Independent Chairman
Ann-Marie Holmes Vice President-Operations & Manufacturing
George S. Davis Chief Financial Officer & Executive Vice President
Daniel J. McKeon Vice President-Information Technology Group
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