Update 23-09-2024: Bloomberg reports that investment firm Apollo Global Management wants to offer up to $5 billion in exchange for a stake in Intel. It would be a shot in the arm for the ailing chip giant and an alternative to a radical merger with Qualcomm. The two parties have done business before. Intel sold an $11 billion share of the Irish chip factory in Leixlip to Apollo in June.
News and rumors surrounding Intel have arrived in buckets lately. The latest development is an unexpected share price increase for the American chipmaker. The reason? Vague and unrealistic reports of a takeover by Qualcomm.
The Wall Street Journal (WSJ) was the first to report on the alleged takeover. The rest of the press took little time to whip up the news into something it was not. The Verge took the cake with the most ludicrous headline:”Qualcomm wants to buy Intel.” This will have drawn viewership, but did not even match WSJ’s initial reporting. What exactly is going on?
Vagueness at its finest
WSJ states that Qualcomm is still keeping all options open, but that in recent days it has polled Intel for a takeover. Further details are lacking, except that buying up parts of Intel is also still on the table as an option.
Intel is worth $93 billion at the time of writing. Qualcomm is about twice as large thanks to its $188 billion in market capitalization, right? It’s not that simple. First of all, such market caps are not a reflection of physical reality. Where Qualcomm has roughly 50,000 employees, Intel features more than 100,000 (even after its planned 15 percent reduction is complete). In addition, Intel owns chip factories, research facilities and plots of land worldwide, all of which would have to be accounted for if anyone’s looking to buy it all up.
A more credible news report appeared earlier this month: Qualcomm would indeed be interested in parts of Intel. This specifically involved parts of the PC design division, but with the freely interpretable conclusion that it would not necessarily stop there. Somewhat logical targets would be automotive player Mobileye, which Intel owns a majority of, or Altera, the FPGA spinoff that is due for an IPO from full Intel ownership. In either case, there is no evidence that Qualcomm is really considering a bid for these components. Intel itself is adamant that there are no plans to lose its stake in Mobileye.
Lumbering moves
A direct takeover of Intel by Qualcomm is unrealistic. In short, Qualcomm doesn’t have the cash for it. Instead, at most, a stock-for-stock merger could be possible, in which Intel shareholders exchange their stakes for Qualcomm shares. According to WSJ, selling existing Intel components is another option to make the acquisition a reality. The biggest move for such a ploy would be a final spinoff of Intel Foundry, which already became an independent business unit recently. Detaching the chipmaker from the chip designer would take years. According to CEO Pat Gelsinger, Intel and Intel Foundry are still “better together,” so we don’t even really need to anticipate that move yet.
We by no means see these lumbering moves as a sign that a Qualcomm bid is imminent. Indeed, it is extremely unlikely that one will ever appear. An actual acquisition, by the way, would undermine the existing x86 license agreement with AMD, as The Register pointed out. This would require AMD to grant approval for Qualcomm to make x86-64 chips.
It would then be up to competition authorities in the US, Europe and the UK to approve the deal. Despite the fact that Microsoft got an acquisition of Activision Blizzard past these watchdogs and Broadcom managed to acquire VMware, an Intel-Qualcomm deal is highly undesirable from a competition standpoint. Intel is the biggest player in the laptop and desktop markets, while Qualcomm is vying with Mediatek for dominance in the Android smartphone world. The most similar recent attempt at such a deal was Nvidia trying to take over Arm. That met with a final roadblock from regulators.