Qualcomm Smells a Deal...
Lauren Thomas, Laura Cooper, & Asa Fitch
Given all the tumult, the vultures have been circling Intel. One known to be circling – just a few weeks ago, it was reported that Qualcomm was looking at buying Intel's chip design business – apparently just swooped down to inspect the whole wounded animal. Here's Lauren Thomas, Laura Cooper, and Asa Fitch:
Chip giant Qualcomm made a takeover approach to rival Intel in recent days, according to people familiar with the matter, in what would be one of the largest and most consequential deals in recent years.
A deal for Intel, which has a market value of roughly $90 billion, would come as the chip maker has been suffering through one of the most significant crises in its five-decade history.
A deal is far from certain, the people cautioned. Even if Intel is receptive, a deal of that size is all but certain to attract antitrust scrutiny, though it is also possible it could be seen as an opportunity to strengthen the U.S.’s competitive edge in chips. To get the deal done, Qualcomm could intend to sell assets or parts of Intel to other buyers.
Yeah, the US would be in an interesting position here. On one hand, this type of deal would almost seem to be a trolling of Lina Khan. "We heard you like deals, Lina, get a load of this one!" On the other, Intel is the centerpiece of the Biden administration's CHIPS Act. If Intel continues to flounder, that's neither a good look nor good strategically for the country. Maybe as a lame duck administration, they care less – or maybe they care more, as it's all about legacy now, and cementing US chip production would seemingly be a big one going forward.
A Harris administration would undoubtedly keep up that bargain. A (second) Trump administration? Who the hell knows? He'll probably aim to torpedo any Biden work, but this one is also in line with some of the Trumpian ideals, in so far as he has any. Perhaps Pat Gelsinger should start sending Jim Jordan fawning letters, just in case...
Intel—once the world’s most valuable chip company—had seen its shares drop roughly 60% so far this year before The Wall Street Journal reported on the approach. As recently as 2020, the company had a market value above $290 billion. The stock closed up over 3% Friday after the Journal’s report.
Shares in Qualcomm, which has a market value of around $185 billion, closed down around 3%. Its shares had been up around 17% so far this year prior to Friday.
Intel's stock obviously jumped on the news, but basically Qualcomm is worth double what Intel is now worth, which is wild as just five years ago, they were inverted, with Intel worth double (or a bit more at times) Qualcomm. So yeah, Qualcomm must smell a deal here...
Qualcomm is a leading supplier of chips for smartphones, including ones that manage communications between phones and cell towers. It is one of the most critical suppliers for Apple’s iPhones, among a range of other devices.
It's also worth noting that Apple is trying like hell to break away from Qualcomm. And incidentally, they bought Intel's modem business a few years back to do so. The fact that Apple now owns that business, that Intel has basically no smartphone business, and that Apple is likely to break away from Qualcomm at some point in the next few years (and that would be very bad for Qualcomm's business if/when it happens) should actually help any deal here to get done – if any of the regulators care about such things, which they probably don't.
Qualcomm and Intel have also sought to profit from the artificial-intelligence boom with the advent of AI features in phones and computers, although both have been overshadowed by AI chip giant Nvidia.
That should help as well. NVIDIA's current market cap? $2.85T. In other words, it's 10x Qualcomm and Intel combined.
Having said all that, it feels like this deal is pretty unlikely – at least any time soon. After weeks of endless bad news, Intel finally swung back a bit with a flurry of new deals/ideas following a recent board meeting. Presumably, Gelsinger will be given more time to execute and operate on that strategy. Qualcomm's offer would have to be so above-and-beyond and it seems like they would really have to stretch to make such an offer, which would seemingly be the biggest tech deal of all time.1
Microsoft on the other hand...2
Update: Lauren Hirsch and Don Clark corroborate the story for The New York Times, with a few new elements. Notably, that while Qualcomm asked about "the possibility of acquiring" Intel, no formal offer has yet been made. They also bring up the notion that Qualcomm might only want to acquire the chip design business and not the fab business -- which is what Reuters had reported on earlier this month (linked above).
1 Could/would Microsoft be game to help Qualcomm with such a deal, given their closer tie-up of late? One which has further hurt Intel...
2 To be clear, I don't think Microsoft should (or could) buy Intel. But I think a large investment could go a long way for both sides...