According to an exclusive report from The Wall Street Journal, Qualcomm approached Intel about potentially striking an acquisition deal. Through “people familiar with the matter,” the paper explains that the potential deal is “far from certain,” but if it’s true, this deal would mean huge changes for the tech industry.
Acquisitions happen all the time in the tech industry, but it’s typically a major tech company buying out a smaller company. Cory Johnson, Futurum Group chief market strategist, explained on a Yahoo Finance podcast that “This would be the biggest deal in the history of the semiconductor industry, ever.”
Intel and Qualcomm are two of the biggest chipmakers in the world, and the possibility of merging the two companies brings up a ton of questions and valid concerns from both analysts and consumers. Most people seem to think there’s no way this deal is happening, but not everyone is convinced.
Chances are slim that Qualcomm can actually acquire Intel
Conditions are ripe for Qualcomm to acquire Intel, as Intel’s shares overall have dropped by 57% year-to-date (while Qualcomm’s are up by around 17%) and the company is widely known to have its fair share of financial struggles.
However, MarketWatch says Hendi Susanto, a Gabelli Funds portfolio manager, believes “There are more cons than pros in a hypothetical case of combining Qualcomm and Intel,” with one huge reason being that “Qualcomm will inherit all Intel’s challenges.”
Qualcomm has been the dominating chipmaker in the smartphone world, while Intel took on that role for PCs and servers for years. But with Qualcomm’s Snapdragon X Elite chips making an impressive debut in laptops, the company has a strong presence for both smartphones and PCs now.
(Image credit: Stevie Bonifield)
Would that be enough to overcome all of Intel’s financial challenges, though? Especially when you consider, as Reuters points out, “Qualcomm has never operated a chip factory.” The publication goes on to say, “Qualcomm lacks the experience needed to ramp up Intel’s fledgling foundry business, which recently named Amazon.com as its first major customer.”
If Qualcomm were to actually propose a deal, it’d have to pass through regulatory antitrust scrutiny, and there’s a good chance the acquisition might not be approved. After all, antitrust laws are in place to prevent major companies from acquiring all other major companies (among other things) in their industry, and Qualcomm and Intel are two huge companies in the same industry.
However, Futurum Group’s Cory Johnson thinks a deal could pass antitrust scrutiny. He says, “We really need a strong chip industry in this country to fight against the risk of concentration we have in Taiwan. And something that would help Intel survive and do better, which this merger might be seen as, might be welcomed by Washington.”
MarketWatch notes that Intel declined to comment on the WSJ report, and Qualcomm didn’t respond to the request. We’ll keep an ear out for official updates from either company or any new reports on a potential acquisition.
