Qualcomm floats Intel takeover - analysts weigh in

Investing.com -- Qualcomm (NASDAQ:QCOM ) has recently initiated talks with Intel (NASDAQ:INTC ) about a potential acquisition, reports suggested last week. While such a deal could reshape the semiconductor industry, it is likely to face major challenges.

Qualcomm's CEO, Cristiano Amon, is reported to be personally leading the negotiations with Intel. Amon has been exploring a range of options for the company, per the reports.

Earlier in the month, reports revealed that Qualcomm had been evaluating a purchase of parts of Intel’s design business, with particular interest in its PC design unit. Qualcomm executives have allegedly been reviewing Intel’s entire portfolio of businesses as part of their considerations.

The talks are still in the early stages, and Qualcomm has yet to submit a formal offer for Intel, according to the reports.

Qualcomm's approach comes at a difficult time for Intel, once the world’s leading chipmaker, but now grappling with a stock price that has plummeted more than 56% since the start of the year.

Should the deal proceed, it would likely attract intense scrutiny from antitrust regulators in the U.S., China, and Europe. Qualcomm could be required to sell off parts of Intel to gain regulatory approval.

If successful, the acquisition would represent the largest takeover attempt in the tech sector since Broadcom (NASDAQ:AVGO )'s $142 billion bid for Qualcomm in 2018, which was blocked by President Trump due to national security concerns. What analysts say about reports of possible Qualcomm-Intel deal

Stifel: “Similar to other proposed mega-deals that were unable to clear high regulatory hurdles… we believe that a Qualcomm/INTC deal would be unlikely to garner regulatory approval. If a proposed deal were to be announced, we believe that a lengthy review process, potential roadmap disruption and other uncertainties would likely prove positive for AMD (NASDAQ:AMD ) in terms of further market share gains in the PC and general purpose data center server markets.”

Bernstein: “We have tried to ballpark accretion. But some rough math suggests a stock deal that includes the fabs would be significantly dilutive to QCOM, and adding cash rapidly increases leverage to high levels.

“We’ll be honest, we would prefer that Qualcomm not pursue this as it seems very risky to us given uncertain returns.”

JPMorgan: “We believe there are some aspects and more so certain parts of Intel that are a strong fit for Qualcomm, and an acquisition focused on those assets, including PCs as well Datacenter Servers, would make strategic sense.”

Mizuho: “For QCOM attractive diversification, but a combined sum-of-parts at ~$186B conservatively for INTC vs QCOM's current market cap of ~$188B implies significant financing needs. There could also be FTC challenges and pushback from peer semiconductor companies. We also note CEO Pat Gelsinger has even until recently focused on INTC's 4 nodes in 5 years and its foundry strategy to drive a US beachhead in semiconductor manufacturing.”

Source: Investing.com