Instant Reaction: Qualcomm Approached Intel About A Takeover Deal

Published Sep 20, 2024, 8:34 PM

Intel shares soared after the Wall Street Journal reported that Qualcomm approached the company about a takeover, a potential record-setting deal for the chip industry. For instant reaction and analysis, hosts Carol Massar and Matt Miller speak with Bloomberg Technology co-host Ed Ludlow.

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Qualcom has, it seems to have approached Intel, according to people familiar. Again, just a headline from the Wall Street Journal. You've got chairs of Intel up about four percent as we speak. You've got shares of Qualcomm down about four percent as we speak. So let's get to it with one of the co hosts of Bloomberg Technology on Bloomberg TV, and that is of course Ed Ludlow out there. One of the best people we could talk to.

Ed Ludlow has sat down with interviews of all with all the most important CEOs in Silicon Valley, but he's especially familiar with Pat Gelsinger. So I think he's a great guy to talk to you on this.

All right, So what do we know? What do you think?

I think, well, what we know very little. The Journal the basics are is reporting, citing anonymous sources, that Quowcom made an approach to Intel in the last few days, and they state in their report that actually they do not have a sense of how receptive Intel is to such a deal. The context is that it's out of left field. For two reasons. Intel's just gone through a massive restructuring, which we can discuss the details of but also for Qualcom, it doesn't really make any sense. Historically, Qualcomm is a company that designed semiconductors that goes into your smartphone. More recently, they've really wanted to move into the PC field, which historically Intel has dominated, and Qualcom has made inroads into that market with their own technology. The thing that we don't know is which bit of Intel would Qualcom on paper want to buy. And so that's why I bring up those two points, because if they wanted Intel's PC business, it would be a departure from the strategy so far which has worked. If they want the foundry business, that the business of manufacturing semiconductors, that's a different kettle official together.

Well, and are those two businesses going to be separated? Is that something that Gelsinger is really considering moving forward on.

Yes. So the rece news of the week is that Intel is going through a second or restructuring or rethink under Pat Gelsinger. And the biggest part of that is where the foundry business or the manufacturing business is its own standalone entity, its own subsidiary, and this subsidiary would manufacture semiconductors for Intel. Intel designs chips for PCs and for data centers, servers, and a number of other things. But it would also manufacture them for third parties. The Qualcom story, and again we do not know this. All we know is that Qualcom made an approach for Intel, and we don't have any of the financial terms that were offered. But Qualcom has no experience in manufacturing chips. On this show, Carol, I think I've said this to you so many times in the last few weeks. Yeah, but we call these companies chip makers. They are not. They are chip designers and a third party manufactures it for them. So maybe Quilcom looks at Intel and goes, that would be quite convenient to have our own manufacturing footprint here in the United States, because that part of Intel's business is kind of humming.

Well, you know what's funny is the headline initially crossed. I'm like, okay, this is an Intel story, Like is Intel getting a lifeline? Like you know, we've talked with the inking who's done great dives as you know, into how Intel got to where it is today. Having said that, I thought, how much of this is a quad Comm story? Qualcom looking to transform itself in a different way right.

I'm just dotting the eyes and crossing the t's. But I got the emails in my inbox. Intel declines to comment, so I just just doing that, you know, because it's a you know again, the Wall Street Journal story is one citing anonymous sources, and neither company is commenting. It's really difficult to answer. Should we do some math together on how feasible such a deal would be. Qualcom has a market cap of about one hundred and eighty five billion dollars. Intel has a market cap of around ninety billion dollars. Qualcom has thirteen billion dollars on It's a balance sheet of cash and crash equivalents, and then there's antitrust. I'm not I just said on TV to Addict Steele and Vonnie Quinn. I'm not a banker, guys. I'm a journalist, but I do have some experience in reporting on deals, and I don't know how one would finance such a venture.

Don't undersell yourself, thank you, you know. To me, it seems like if you're going to strike, now is a pretty good time because Intel is on its knees. I mean, they have plans to build factories and people aren't really sure if they're going to be able to go through with it. I know the federal government is aching to give them billions and billions of dollars, but they're having to figure out ways to do that, you know, finding them clients essentially. So I mean, if you're going to buy Intel at all, I mean, it's better surely to do it after their stock has fallen sixty percent year to date.

Yeah, there is an element of timing, you know, and you can talk about you state performance or even the performance of the last two years for both companies. Relatively speaking, it's just for me, like the technology story doesn't make a lot of sense, you know. We interviewed Christiano Ammon, the Quowdcom CEO, many times in the last two years, and on earnings in particular, it took a long time for investors to give him credit for his vision of moving Qualcom beyond a company that did one thing, which is the RF chip in your phone and the modem in your phone, particularly on behalf of the likes of Apple, right. He wanted Qualcom to design semiconductors that did all kinds of things in cars and now PCs. He wanted to be at the cutting edge of virtual augmented reality headsets, and it took a lot of time to show up in the financials, but it is now showing up in the financials, and so you know, forget the foundry business for a second. Intel has all these products across PC and data center that Qualcom is now being competitive in but in its own right. So why you know, from a technology perspective, it doesn't make a lot of sense either.

Look at that the journals. I know you've been looking at it as well. A deal far from certain. The people cautioned to get the deal done. Qualcom could intend to sell assets or parts of Intel to other buyers. So just a few more aspects of this. Yeah, it's just kind of interesting to get our head around it. Right, there's just so little information you do wonder, But yeah, Intel is in a weaker spot, and I guess we keep trying to think about what is the Intel of the future. The government, you know, and conversations we've had with you and with you and King about the importance of having Intel as a chip company in the United States is important for national security concerns, right, It's important for the United States. So you do wonder about something seems to have to happen to Intel going forward.

Yeah, I also didn't really answer Matt's question, for which I apologize and both of your questions basically, well, isn't Intel in a perilous situation? And again go to the two parts of its business. It used to be a clear leader in many markets, which it's now a lot not You know, you guys know the story so well. In data centers, everybody wants in Vidia's GPU to train AI models. Intel didn't have one for quite a long time, but it also was over index towards CPUs a bit a more basic processor, and then demand fell away. On the foundry side, they wanted to be the factory for chip makers or chip designers all over the world, but they weren't really and that was why it was significant that they were able to name a WS as a customer to show that they could service a third party. But at the same time, running a business is about how much revenue're generating, how much you're spending to generate that revenue, and whatever your profit and losses are, and they had to do something desperate to react to that, which is all of the projects initiated in the last couple of years were reviewed and they cut back, they cut headcount, and so they seemed to be on a path forward, which again the timing of this, the Wall Street Journal's report is that Quowcom approached Intel, not necessarily that Intel was shopping at self or anything like that.

Right, that's a big difference, isn't that a bit a big difference?

Huge? Yeah?

Yeah? And also you know, frankly, what this may get me in hot water? I don't know, but Pat Gelsinger's job was on the line, and as of the latest board meeting and strategy review, he survived, right, So I don't necessarily think that makes sense either from his perspective and trying to turn around the company.

I just wonder about the two businesses and if you had to assign out of the ninety billion dollars in market cap, if you had to assign some of that to the design business and the rest to the foundry business, how's that breakdown?

Look?

Just quickly, kid, iou rot about thirty seconds.

I'm trying to bring up fa go and give you the actual answer, and I can't. I'm not quick enough. But I think basically that at this point it's a pretty even split, but the future is predicated on foundry.

Pretty wild, all right. You might have a busy weekend I imagine, sorry, and he.

Looks so bombed down and had something plain tonight.

You can tell it's like, honey, my wife watches this show, listen to this show.

So yeah, all right.

Ed Ludlow, of course, co host of Bloomberg Technology on Bloomberg Television.

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