Qualcomm Inc. (QCOM) is reportedly considering a bold move: acquiring Intel Corp. (INTC). This potential deal could significantly diversify Qualcomm’s product offerings, pushing them into the PC and data center markets currently dominated by Intel. However, analysts are raising concerns about the potential risks and challenges associated with this acquisition.
The whispers of a Qualcomm-Intel merger have sparked skepticism among industry experts, with many pointing to Intel’s struggling semiconductor manufacturing unit as a major obstacle. Intel’s share price has plummeted by nearly 77% from its 52-week high, making the company an appealing target for potential buyers, including Qualcomm and Apollo Global Management (APO), which recently proposed a $5 billion investment.
Stacy Rasgon, a prominent chip analyst at Bernstein, expressed his doubts about the deal’s feasibility. He and his team wrote, “We would prefer that Qualcomm not pursue this as it seems very risky to us given uncertain returns.”
Qualcomm’s desire to diversify its revenue streams by entering Intel’s core markets is understandable, but Intel’s semiconductor factories, or fabs, are a source of significant concern. Rasgon highlights Intel’s struggles in managing these fabs, allowing competitors like TSMC to gain a competitive edge. He also acknowledges the political significance of Intel’s U.S.-based fabs in Arizona, Oregon, and New Mexico.
Rasgon speculates that Qualcomm might sell these fabs if the acquisition goes through, but questions Intel’s willingness to consider such a move. “Is Intel desperate enough to seriously consider something like this? We’re not so sure,” Rasgon and his team conclude.
The potential acquisition faces significant hurdles, according to analysts. Antitrust scrutiny, both domestically and internationally, could pose a major challenge, as the deal would merge two major chip firms, creating a behemoth with substantial market shares in smartphones, PCs, and servers.
Benchmark analyst Cody Acree believes the acquisition is “logically unlikely.” He suggests that Qualcomm would need to offer a significant premium—around 40% to 50%—over the current trading price of approximately $22 per share to entice Intel shareholders. However, the regulatory scrutiny surrounding the transaction may be too difficult to overcome.
Meanwhile, Intel has been navigating its own set of challenges. CEO Pat Gelsinger presented a comprehensive plan to the board in September, focusing on asset sales and cost reductions, including halting a $32 billion project in Germany.
If the Qualcomm-Intel deal were to materialize, it could become one of the largest M&A deals in history, surpassing Microsoft Corporation’s $69 billion acquisition of Activision Blizzard.
On Monday, Intel’s shares closed 3.3% higher at $22.56, while Qualcomm’s shares closed 1.75% lower at $165.96, according to Benzinga Pro data.
