Qualcomm explores friendly takeover of Intel — Know more about potential transformational deal for chip sector

Intel — once the world's largest chipmaker — might soon face a friendly takeover bid from Qualcomm. Reports quoting people in the know suggested that talks had recently begun for a purchase of the company in its entirety. The development came even as the struggling company announced a raft of changes this week aimed at getting its business back on track.

According to a Wall Street Journal report, Qualcomm had approached its rival in recent days to discuss a potential acquisition. Talks however remain in a rudimentary stage and it is unclear whether the initial approach will lead to an agreement. A deal of this magnitude — even if both parties were amenable — is however likely to attract antitrust scrutiny.

The news spurred shares of Intel Corp 8% higher in New York trading on Friday while San Diego-based Qualcomm declined as much as 5.5%.

Intel is currently facing its most difficult time in about five decades — with shares falling about 37% over the past 12 months. The company is headed toward its third consecutive year of shrinking sales with an estimated $52 billion revenue in 2024 — just 70% what it brought in back in 2021. A person in the know however told Bloomberg that CEO Pat Gelsinger still believed the turnaround plan could be sufficient to remain an independent company.

The company is currently estimated to have a market value of about $93 billion. Meanwhile, Qualcomm stock has risen more than 50% over the same period for a market capitalization of about $188 billion. Despite the recent turbulence, a takeover would be the largest-ever transaction for the semiconductor market and potentially transform the industry.

A Bloomberg report on Saturday noted that the current proposal was for the company in its entirety. However Qualcomm has not ruled out buying or selling parts of Intel in a combination. Another person in the know told the publication that Qualcomm has been speaking with US regulators and believes an all-American combination could allay any concerns.

Earlier this month a Reuters report however indicated that Qualcomm executives were examining the entire portfolio of businesses handled by Intel. The company had reportedly explored the possibility of acquiring portions of Intel's design business — with a particular interest in its PC design unit. CEO Cristiano Amon is said to be personally involved in the negotiations.

It however remains unclear how such a deal would be financed by Qualcomm.  Recent filings indicate that the company (with a market value of $188 billion) has roughly $13 billion in cash. Meanwhile Intel is valued at $122 billion and has several billion dollars of of net long-term debt.

(With inputs from agencies)