Will Qualcomm Acquire Intel?

• According to inside sources, Qualcomm has reached out to Intel with a merger/acquisition deal.
• We don't know yet whether Intel has responded to the request or not.
• Despite the uncertainty, the share prices of both companies have been affected. Intel's went up by 3% whereas Qualcomm's went down by 3%.

According to internal sources (who do not wish to be named), Qualcomm recently approached Intel with a takeover proposal after the company's financial struggles came to light. The news has been confirmed by both The Wall Street Journal and CNBC.

However, most of the details of this story are behind curtains right now. For instance, we don't know whether Intel responded to Qualcomm's request or what were the exact details of the proposal. Plus, neither of the companies have responded to any requests for comment.

Despite all the uncertainty, Intel's shares went up by 3% after the news came out, whereas Qualcomm's shares dipped by 3%, showing that the takeover news has been met with a mixed feeling of optimism and apprehension.

What Would This Takeover Look Like?

First things first: we still don't know whether this deal is actually happening, and even if it is, we're unsure if it will be a complete takeover or a merger.

However, for a moment, let's assume that it does indeed go through - what will it then look like for both companies? How will it affect them? Let's discuss.

Intel

Intel's current market cap is over $93 billion. So, if this deal with Qualcomm happens, it will be one of the biggest tech mergers ever.

It's an open secret that Intel is in a bad position right now from a financial standpoint. The company's fall started a few quarters ago and has only gotten worse in 2024.

In August, after the company announced yet another disappointing quarter of earnings, its stocks went down by a massive 26%, closing at $21.48. This was one of the biggest one-day drops for the company in the last 50 years.

One of the reasons behind Intel's poor performance is that it missed out on the AI boom. A company like Nvidia, which capitalized on the AI train, captured over 80% of the advanced chip industry.

Furthermore, Intel is also set to miss out on its promised share of the CHIPS Act fund. I talk about this in detail in this post.

Consistent losses have also affected Intel's ability to maintain its workforce. Last month, the company revealed that it's planning to slash 15,000 jobs.

This, along with the fact that Intel knew about processor issues since 2022 and knowingly kept customers in the dark, hampered its goodwill in the industry. Investors started losing faith in the company, which further dropped its share prices.

All in all, it looks like Intel might benefit from a merger. Plus, if this deal doesn't work out, Intel has a plan B. CEO Patrick Gelsinger sent a memo to the staff that assured them that the company is still committed to investing in its foundry business. However, this project will likely require $100 billion over the next 5 years, meaning Intel is also looking for investors.Qualcomm

Now, let's talk about how the takeover might affect Qualcomm. For starters, Qualcomm's market cap ($188 billion) is more than double that of Intel ($93 billion).

However, its average revenue is less than Intel's. In the fiscal year of 2023, Qualcomm generated a revenue of $35.8 billion in sales, whereas Intel generated $54.2 billion.

Also, Qualcomm's total assets are worth a little over $23 billion and it only has $7.8 billion in cash and cash equivalents at its disposal. So, the question is whether Qualcomm will be able to afford to completely take over Intel.

Qualcomm will likely have to sell away parts of Intel's business to make this deal work, according to the WSJ.

The other major hurdle is antitrust regulations. Both Qualcomm and Intel are two of the top players in the industry. So, the two joining hands will certainly affect competition in the industry, and regulatory bodies - as well as Nvidia - might have a few things to say about it.

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