:max_bytes(150000):strip_icc()/INV_IntelLogo_GettyImages-1246677564-7f331b7a4080478fa9af2dc78164809e.jpg "Why Some Analysts Say Qualcomm’s Potential Takeover of Intel is ‘Impractical’")
:max_bytes(150000):strip_icc():format(jpeg)/INV_IntelLogo_GettyImages-1246677564-7f331b7a4080478fa9af2dc78164809e.jpg)
Key Takeaways
- Qualcomm reportedly came to Intel recently with interest in a potential takeover.
- Such a deal could offer a lifeline for Intel’s foundry business and position Qualcomm as a dominant player in the PC processor market.
- While Intel shares gained following the report of Qualcomm’s interest, analysts question the practicality of such a deal, given Intel’s debt and Qualcomm’s weak cash position.
Intel (INTC) shares have gained ground as investors reacted to a Wall Street Journal report late Friday that said Qualcomm (QCOM) had made a “takeover approach” to the beleaguered chipmaker.
However, securities analysts are less keen on the idea, with those at Bank of America calling it “intriguing but perhaps impractical.”
A Qualcomm takeover could offer Intel a lifeline for its struggling foundry business, which produces chips for outside customers, the firm noted in a research note released on Saturday. Intel could fill its manufacturing facilities with Qualcomm products, and Qualcomm could become a significant customer for Intel’s silicon wafers.
That said, Intel is saddled with more than $50 billion in debt, and Qaulcomm has just $13 billion in cash on its balance sheet, making a takeover deal difficult, the BofA analysts said. In addition, the move could “create confusion given potential for headcount and roadmap disruptions,” making such a merger a potential boon for rivals such as Nvidia (NVDA) and Advanced Micro Devices (AMD).
Regulatory Issues Loom
For a Qualcomm-Intel deal to go through, it likely would require a level of buy-in from the U.S. and Chinese governments, analysts at JPMorgan wrote over the weekend.
Qualcomm could look for the U.S. government to provide a capital commitment to the foundry business, the success of which is important to domestic semiconductor production.
Then there’s regulatory approval from China, which analysts acknowledge would be a major obstacle for such a move. The country “historically has taken years to even consider medium sized transactions,” the BofA analysts said.
Over the weekend, Apollo Global Management offered to invest as much as $5 billion in Intel, according to a Bloomberg report. Intel previously agreed to sell Apollo a 49% stake in a chipmaking site in Ireland in June.
Shares of Intel gained 3.3% on Monday, while Qualcomm stock was down 1.8%.