Arm Holdings, majority-owned by SoftBank, instigated a business proposal for the acquisition of Intel’s product unit, only to be shut down as it was made clear that the department was not on the market, states a source with immediate involvement in the dealings. When formulating its proposal, Arm’s focus was not on Intel’s manufacturing body, reveals the insider who chose to remain anonymous since the deliberations were confidential.
Representatives of Intel, a global leader in chip production, and Arm refrained from making a public statement. Having once held a prime position in the chip manufacturing world, Intel has found itself at the centre of buy-out conjecture as the company fell into disarray over the course of this year. The company had to face a critical blow to its share market after a disastrous financial declaration the previous month, compelling it to layoff a solid 15,000 staff force as part of financial damage control. Moreover, the company is curtailing factory expansion tactics and bringing an end to its long-admired dividend.
Over time, Intel has thought about splitting up the company, and now as part of its remedial measures, it is contemplating de-linking its chip product unit from its manufacturing sector. The company is hoping that this strategic move will not only draw attention from external stakeholders and customers but will also set a strong base for a potential split-up.
Arm, noted for its smartphone chip designs sales, has its Chief Executive, Rene Haas, campaigning its expansion outside the smartphone market. He is keen to breach into personal computer and server ventures which would place its chip designs in competition with Intel’s configurations. Despite Intel’s dominance maintining its hold in these markets, its technical superiority isn’t as prominent as it once was.
Integration with Intel could potentially bolster Arm’s market reach and motivate the sale of its own line of products. Currently, Arm licenses technology and designs to clients who then convert them into finished commodities. Its prestigious clientele includes leading names in the technology world, including Amazon, Qualcomm, and Samsung. Under Haas’s leadership, Arm has been trying to venture more into offering full-fledged products, which could pitch it against its own licensees.
Based in Cambridge, UK, Arm has only a portion of Intel’s revenue. However, since its initial public offering last year, the company’s market cap has skyrocketed to over $156 billion. The investor community views Arm as a key player set to profit from increased spend in Artificial Intelligence technology, particularly as it expands further into the industry of data centre chips. What’s more, Arm is bolstered by a significant 88% stake held by Japan’s SoftBank, contributing to its potential financial leveraging abilities.
In stark contrast, Intel – once a titan of the tech industry – has seen over half its value erode this year, leaving it with a current market cap of mere $102.3 billion. Not all hope is lost for the company though, as alternate solutions are being contemplated. One such example comes in the form of an investment offer from Apollo Global Management. In recent times, the firm has shown a willingness to inject as much as $5 billion into Intel, signifying a show of faith in its CEO, Pat Gelsinger.
Intel is also considering divesting a portion of its shares in semiconductor manufacturer Altera to private equity investors. Intel originally acquired this business back in 2015 before separating it from its operations last year with an aim to publicly list it. Rumours of a possible acquisition by Qualcomm have recently provided a shot in the arm for Intel’s stock prices. – Bloomberg