This New Acquisition Is Another Step in the Right Direction for Intel Corporation (INTC)

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It’s been a busy month for Intel Corporation (NASDAQ:INTC). 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.

Intel CorporationIn addition to the upgraded Atom processor rollout, Intel Corporation (NASDAQ:INTC) 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 N.V. (ADR) (NYSE:STM) and Ericsson (ADR) (NASDAQ:ERIC) 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 Corporation (NASDAQ:INTC) 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 N.V. (ADR) (NYSE:STM) and Ericsson (ADR) (NASDAQ:ERIC) had planned to dissolve the 4-year-old venture. Investors might wonder why Intel Corporation (NASDAQ:INTC)’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, Inc. (NASDAQ:QCOM), 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 Corporation (NASDAQ:INTC): 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 Corporation (NASDAQ:INTC)’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, Inc. (NASDAQ:QCOM) — 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.

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