The excitement never ends for Intel (NASDAQ:INTC)or so it seems. After shares rose earlier this week due to a partnership with Amazon and a $3 billion contract with the Department of Defense, they rose again late Friday when it was reported that Qualcomm (NASDAQ:QCOM) had contacted its competitor about a possible takeover, indicating that the struggling semiconductor company could be a potential suitor.
Intel shares closed up 3.3 percent after the news broke, having risen as much as 9.5 percent when the news broke. Qualcomm closed down 2.9 percent after falling 6 percent earlier, showing that Qualcomm investors were not enthusiastic about the idea of a merger between the two chip giants.
Could Qualcomm buy Intel?
Shortly before the stock market closes The Wall Street Journal reported that Qualcomm has approached Intel in recent days about a takeover. Such a deal, if it passes regulatory approval, would be one of the largest in the history of the technology industry.
The news surprised investors as Intel is reportedly not pursuing “strategic options” such as an acquisition and is working on a massive restructuring that includes laying off 15 percent of its workforce. The stock plunged in early August when the company announced the news, which also included disappointing second-quarter results, weak guidance and the elimination of its dividend.
It’s unclear what Qualcomm’s goal would be with a takeover, but it’s likely that the company sees it as an opportunity to consolidate its dominant position in the PC market. However, Qualcomm is best known for its wireless components.
Given the difficulties of Intel’s foundry business, Qualcomm could seek to sell this business unit if the deal is concluded.
What this means for Intel
It seems unlikely that a deal will be made, and CEO Pat Gelsinger is unlikely to be willing to sell the company given that the share price is close to a 20-year low.
Still, the news raises a prospect that investors hadn’t fully considered. Perhaps Intel’s best bet would be to launch a bidding war for the company, as there would likely be multiple suitors. I think there would have to be more failures at the company before that happens, but investors understandably like the idea of an interested buyer.
Stay tuned for further developments at Intel, as news surrounding the chip stock changes rapidly.
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