Ericsson in Talks to Invest in Intel Standalone Network Business

Bloomberg
Yesterday

The Swedish telecom equipment maker Ericsson AB is in talks to invest hundreds of millions of dollars in Intel Corp.’s networking infrastructure business, according to people familiar with the matter.

The investment would make Ericsson a minority stakeholder in the newly spun-off networking and edge business known as NEX that has long supplied chips to Ericsson for its radio access network hardware, the people said, asking not to be identified because the talks are private. Intel has held talks with other potential investors to join Ericsson in taking a stake in the business, which manufactures chips for use in computer and telecommunications networks, the people said.

An arrangement has not yet been finalized, they said, and it’s possible a deal won’t materialize.

Ericsson is a longtime customer of Intel, which has in recent years struggled to keep pace with rivals such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. Former Chief Executive Officer Pat Gelsinger was pushed out of the firm last year after his costly plan to turn the company into a maker of chips for other businesses failed to deliver results fast enough for its board.

Intel has since been slashing costs and looking to sell off noncore businesses to bolster its finances. And last week, the company said it will spin off its network and infrastructure division into a standalone company. In April, the chipmaker agreed to sell a 51% stake in its programmable chips unit Altera to Silver Lake Management.

Intel said in a statement that it has “begun the process of identifying strategic investors.” Similar to the Altera arrangement, Intel said it plans to remain an anchor investor in the networking spinoff, “enabling us to benefit from future upside.” Ericsson declined to provide a statement, saying it doesn’t comment “on the business of its partners” or rumors and speculation.

Intel had been exploring options for the enterprise networking division for months, Bloomberg previously reported. NEX chief Sachin Katti wrote in an memo first reported by CRN that the separate company would focus on chips for communications, networking and Ethernet connectivity. Intel would retain a stake in the company.

Many of Ericsson’s hardware products rely on chips designed by Intel for its mobile network equipment. The companies formed an even tighter relationship early last year when Ericsson announced its future infrastructure would be built on Intel’s Xeon Next-Gen processors for greater speed and energy efficiency.

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