Chipmaker Qualcomm has approached struggling rival Intel about a potential takeover, according to sources familiar with the matter. However, it is important to note that no formal offer has been made and the deal is far from certain. Qualcomm has expressed its intention to pursue a friendly deal, while Intel harbors concerns that antitrust regulators may hinder any potential agreement.
If a takeover were to occur, it would surpass Microsoft’s $69 billion acquisition of Activision as the largest technology deal in history. As of Friday, Intel’s market capitalization stood at $93 billion after its share price surged by 8% following initial reports of Qualcomm’s approach by The Wall Street Journal.
Once the world’s largest chipmaker, Intel has experienced a significant decline in recent months. In August alone, the company lost nearly $30 billion in market value after an unfavorable earnings report led CEO Pat Gelsinger to announce 15,000 job cuts and eliminate dividends.
Intel’s share price has plummeted by 50% since the beginning of this year, leaving the company vulnerable to potential bidders and hostile shareholders. To evaluate Qualcomm’s approach, Intel is working alongside Goldman Sachs and Morgan Stanley. CNBC previously reported that Morgan Stanley had been advising Intel on defending itself against activist investors for several months.
In response to earlier reports by Reuters, sources have confirmed that Qualcomm initially explored acquiring various assets from Intel before considering a full takeover. Unlike Intel, Qualcomm does not manufacture its own chips but instead outsources production to external manufacturers. With a market capitalization of $188 billion, Qualcomm is collaborating with investment bank Evercore in evaluating its approach towards Intel.
The funding for such an acquisition remains uncertain for Qualcomm; furthermore, divesting assets as part of the takeover is also under consideration. It should be noted that any potential deal would face rigorous antitrust scrutiny and raise political concerns regarding national security.
Sources familiar with the matter suggest that if approved by US regulators, this bid would be presented as an effort to strengthen American chipmakers against their Chinese counterparts. However beneficial this may seem on paper though; there are concerns about falling behind foreign rivals due to lengthy acquisition processes which could ultimately jeopardize any potential agreement.
When approached for comment regarding these developments between Qualcomm and Intel; both companies declined or did not immediately respond except Goldman Sachs who also declined comment along with Morgan Stanley Evercore who did not respond either.
This latest development adds further pressure on CEO Pat Gelsinger who was appointed in 2021 with hopes of turning around Intel within five years into a competitive chip manufacturer akin Taiwan Semiconductor Manufacturing Company (TSMC). Unfortunately for Gelsinger though; his turnaround plan has faced numerous obstacles including high-profile executive departures such as Lip-Bu Tan leaving their board along with trailing behind Nvidia and AMD in artificial intelligence chip sales within data centers.
Analysts at Citi argue that if presented with an offer from Qualcomm; shareholders would likely reject it given their belief that exiting semiconductor manufacturing altogether offers better prospects than attempting profitability through leading-edge foundry operations.
In conclusion: Takeover talks between these two industry giants have been met with skepticism among analysts who consider them “almost too silly” even worth commenting on
