In a recent development, Qualcomm, based in California, has established communication with Intel, signaling an intent to potentially acquire the chip manufacturer that has been having difficulties, according to sources familiar with the situation. The proposition is reported to be a friendly one, made recently, for the total purchase of Intel. Nevertheless, Qualcomm has not dismissed the idea of buying or selling parts of Intel in a merged scenario.
Intel, which has approximately 5,000 staff members in Ireland at its primary location in Leixlip, is in the midst of a global restructuring effort, potentially causing about 15 per cent of its global workforce to face redundancies.
There is uncertainty whether the initial proposition will yield a definite agreement, as it is expected to face rigorous scrutiny from anti-trust bodies and it may take some time for completion. Despite this, sources report that Qualcomm has initiated talks with US regulatory bodies, believing that a merger between two US-based firms could serve to ease any potential concerns.
The interest from Qualcomm comes at a time when Intel, their smaller competitor, is facing a challenging period in its 56-year history. Intel’s CEO, Pat Gelsinger, has been strategising a plan to restructure the company and boost its falling share prices. While Gelsinger remains confident that the revival plan could enable Intel to sustain its independence, he is also open to exploring the benefits of diverse transactions, according to sources.
Intel’s shares have witnessed a 37 per cent decrease in the past year, thereby valuing it at about $93 billion. On the flip side, Qualcomm’s shares have seen a more than 50 per cent surge within the same timeframe, resulting in its market capitalisation standing at approximately $188 billion. Given these valuations, a potential agreement between Qualcomm and Intel could emerge as one of the largest in history. The Wall Street Journal was the first to break the news of Qualcomm’s interest, but representatives from both Qualcomm and Intel have kept their comments to themselves.
Qualcomm’s strategic decisions have opened the door to potential newcomers in the market. However, tech giant Broadcom has reportedly decided to remain as bystanders for the time being, according to individuals familiar with the subject. Previously, they had been considering making a bid for Intel, but aren’t currently exploring this option.
Despite being continually presented with diverse strategies by advisers, a Broadcom spokesperson declined to respond. On the other front, Intel is projected to have its third consecutive year of declining sales, with an expected revenue of $52 billion in 2024, a total that is 70% less compared to the figure reported in 2021. However, Intel shares did experience a slight upward shift this week following positive reactions to a host of announcements from the company that renewed faith in Gelsinger’s recovery agenda.
Of these announcements, the most remarkable was Intel’s agreement with Amazon Web Services for a multi-billion dollar joint investment in the development of a bespoke AI chip. Intel also unveiled plans to transform its suffering manufacturing business into a standalone subsidiary. By doing so, Intel hopes to assure potential customers, some of whom vie with Intel, that they are engaging with an unbiased supplier. This prospective split of Intel’s foundry operations from the company’s wider business was a possibility that Bloomberg had previously noted.