Late Wednesday Cloudera said it had bought back all of the stake Intel took in the software company for $314 million, likely booking a substantial paper loss for the chip giant on its investment.
Cloudera (ticker: CLDR) stock advanced 1.1% in the extended session, adding to a $15 close with a 2.5% gain in the regular session. Intel (INTC) stock ticked up 0.1% in after-hours trading, after ending the regular session up 0.9% to $46.57.
Intel invested $742 million several years ago, in part because the chip giant reportedly wanted to have a say in the direction of big data software, such as the products Cloudera makes. In the Wednesday announcement, Cloudera said that the buyback wouldn’t affect existing business partnerships with Intel, and that it was paying $12.05 apiece for roughly 26 million shares.
The investment appears to have generated a loss of about $400 million for Intel, but it isn’t clear that Intel purchased its stake hoping for a windfall. When Intel initially bought the stock, it paid double for the Cloudera shares than what another group of investors paid just weeks before. At the time, then under the leadership of Brian Kzranich, Intel reportedly was aiming to muscle out potential Cloudera buyers, scaring them off with a $4.1 billion valuation.
Intel paid $30.92 for 11.99 million shares, costing the company about 5% of its cash and short-term investments at the time. The price was more than double the $15 share price Cloudera would eventually go public at in 2017.
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In a statement via email, an Intel spokeswoman said that the company decided to sell its stake after Cloudera elected to buy back $500 million worth of its stock.
While the reason wasn’t immediately clear, it’s possible the decision to unwind the Cloudera stake is part of a plan to shed the company’s noncore assets and acquire smaller businesses that will bolster its efforts in areas such as artificial intelligence.
Earlier this year, Intel sold its memory business to South Korea-based SK Hynix (000660.Korea) for $9 billion. Late in 2019, Intel bought Habana Labs, an Israel-based AI chip maker for $2 billion. And in July 2019, Intel said it was selling its smartphone modem business to Apple (AAPL). Apple has reportedly begun building its own cellular modems for its future iPhones.
Write to Max A. Cherney at max.cherney@barrons.com
December 24, 2020 at 08:21AM
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Cloudera Buys Back $314 Million Intel Stake. What It Means for the Cloud Stock. - Barron's
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