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Instant Reaction: Qualcomm Approached Intel About A Takeover Deal · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: Qualcom has, it seems to have approached Intel, according to
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  Speaker 2: people familiar. Again, just a headline from the Wall Street Journal.
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  Speaker 2: You've got chairs of Intel up about four percent as
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  Speaker 2: we speak. You've got shares of Qualcomm down about four
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  Speaker 2: percent as we speak. So let's get to it with
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  Speaker 2: one of the co hosts of Bloomberg Technology on Bloomberg TV,
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  Speaker 2: and that is of course Ed Ludlow out there. One
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  Speaker 2: of the best people we could talk to.
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  Speaker 3: Ed Ludlow has sat down with interviews of all with
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  Speaker 3: all the most important CEOs in Silicon Valley, but he's
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  Speaker 3: especially familiar with Pat Gelsinger. So I think he's a
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  Speaker 3: great guy to talk to you on this.
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  Speaker 2: All right, So what do we know? What do you think?
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  Speaker 4: I think, well, what we know very little. The Journal
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  Speaker 4: the basics are is reporting, citing anonymous sources, that Quowcom
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  Speaker 4: made an approach to Intel in the last few days,
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  Speaker 4: and they state in their report that actually they do
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  Speaker 4: not have a sense of how receptive Intel is to
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  Speaker 4: such a deal. The context is that it's out of
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  Speaker 4: left field. For two reasons. Intel's just gone through a
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  Speaker 4: massive restructuring, which we can discuss the details of but
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  Speaker 4: also for Qualcom, it doesn't really make any sense. Historically,
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  Speaker 4: Qualcomm is a company that designed semiconductors that goes into
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  Speaker 4: your smartphone. More recently, they've really wanted to move into
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  Speaker 4: the PC field, which historically Intel has dominated, and Qualcom
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  Speaker 4: has made inroads into that market with their own technology.
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  Speaker 4: The thing that we don't know is which bit of
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  Speaker 4: Intel would Qualcom on paper want to buy. And so
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  Speaker 4: that's why I bring up those two points, because if
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  Speaker 4: they wanted Intel's PC business, it would be a departure
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  Speaker 4: from the strategy so far which has worked. If they
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  Speaker 4: want the foundry business, that the business of manufacturing semiconductors,
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  Speaker 4: that's a different kettle official together.
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  Speaker 3: Well, and are those two businesses going to be separated?
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  Speaker 3: Is that something that Gelsinger is really considering moving forward on.
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  Speaker 4: Yes. So the rece news of the week is that
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  Speaker 4: Intel is going through a second or restructuring or rethink
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  Speaker 4: under Pat Gelsinger. And the biggest part of that is
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  Speaker 4: where the foundry business or the manufacturing business is its
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  Speaker 4: own standalone entity, its own subsidiary, and this subsidiary would
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  Speaker 4: manufacture semiconductors for Intel. Intel designs chips for PCs and
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  Speaker 4: for data centers, servers, and a number of other things.
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  Speaker 4: But it would also manufacture them for third parties. The
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  Speaker 4: Qualcom story, and again we do not know this. All
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  Speaker 4: we know is that Qualcom made an approach for Intel,
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  Speaker 4: and we don't have any of the financial terms that
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  Speaker 4: were offered. But Qualcom has no experience in manufacturing chips.
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  Speaker 4: On this show, Carol, I think I've said this to
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  Speaker 4: you so many times in the last few weeks. Yeah,
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  Speaker 4: but we call these companies chip makers. They are not.
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  Speaker 4: They are chip designers and a third party manufactures it
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  Speaker 4: for them. So maybe Quilcom looks at Intel and goes,
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  Speaker 4: that would be quite convenient to have our own manufacturing
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  Speaker 4: footprint here in the United States, because that part of
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  Speaker 4: Intel's business is kind of humming.
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  Speaker 1: Well, you know what's funny is the headline initially crossed.
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  Speaker 1: I'm like, okay, this is an Intel story, Like is
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  Speaker 1: Intel getting a lifeline? Like you know, we've talked with
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  Speaker 1: the inking who's done great dives as you know, into
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  Speaker 1: how Intel got to where it is today. Having said that,
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  Speaker 1: I thought, how much of this is a quad Comm story?
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  Speaker 1: Qualcom looking to transform itself in a different way right.
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  Speaker 4: I'm just dotting the eyes and crossing the t's. But
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  Speaker 4: I got the emails in my inbox. Intel declines to comment,
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  Speaker 4: so I just just doing that, you know, because it's
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  Speaker 4: a you know again, the Wall Street Journal story is
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  Speaker 4: one citing anonymous sources, and neither company is commenting. It's
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  Speaker 4: really difficult to answer. Should we do some math together
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  Speaker 4: on how feasible such a deal would be. Qualcom has
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  Speaker 4: a market cap of about one hundred and eighty five
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  Speaker 4: billion dollars. Intel has a market cap of around ninety
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  Speaker 4: billion dollars. Qualcom has thirteen billion dollars on It's a
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  Speaker 4: balance sheet of cash and crash equivalents, and then there's antitrust.
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  Speaker 4: I'm not I just said on TV to Addict Steele
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  Speaker 4: and Vonnie Quinn. I'm not a banker, guys. I'm a journalist,
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  Speaker 4: but I do have some experience in reporting on deals,
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  Speaker 4: and I don't know how one would finance such a venture.
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  Speaker 3: Don't undersell yourself, thank you, you know. To me, it
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  Speaker 3: seems like if you're going to strike, now is a
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  Speaker 3: pretty good time because Intel is on its knees. I mean,
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  Speaker 3: they have plans to build factories and people aren't really
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  Speaker 3: sure if they're going to be able to go through
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  Speaker 3: with it. I know the federal government is aching to
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  Speaker 3: give them billions and billions of dollars, but they're having
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  Speaker 3: to figure out ways to do that, you know, finding
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  Speaker 3: them clients essentially. So I mean, if you're going to
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  Speaker 3: buy Intel at all, I mean, it's better surely to
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  Speaker 3: do it after their stock has fallen sixty percent year
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  Speaker 3: to date.
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  Speaker 4: Yeah, there is an element of timing, you know, and
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  Speaker 4: you can talk about you state performance or even the
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  Speaker 4: performance of the last two years for both companies. Relatively speaking,
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  Speaker 4: it's just for me, like the technology story doesn't make
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  Speaker 4: a lot of sense, you know. We interviewed Christiano Ammon,
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  Speaker 4: the Quowdcom CEO, many times in the last two years,
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  Speaker 4: and on earnings in particular, it took a long time
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  Speaker 4: for investors to give him credit for his vision of
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  Speaker 4: moving Qualcom beyond a company that did one thing, which
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  Speaker 4: is the RF chip in your phone and the modem
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  Speaker 4: in your phone, particularly on behalf of the likes of Apple, right.
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  Speaker 4: He wanted Qualcom to design semiconductors that did all kinds
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  Speaker 4: of things in cars and now PCs. He wanted to
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  Speaker 4: be at the cutting edge of virtual augmented reality headsets,
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  Speaker 4: and it took a lot of time to show up
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  Speaker 4: in the financials, but it is now showing up in
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  Speaker 4: the financials, and so you know, forget the foundry business
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  Speaker 4: for a second. Intel has all these products across PC
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  Speaker 4: and data center that Qualcom is now being competitive in
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  Speaker 4: but in its own right. So why you know, from
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  Speaker 4: a technology perspective, it doesn't make a lot of sense either.
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  Speaker 2: Look at that the journals. I know you've been looking
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  Speaker 2: at it as well. A deal far from certain. The
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  Speaker 2: people cautioned to get the deal done. Qualcom could intend
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  Speaker 2: to sell assets or parts of Intel to other buyers.
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  Speaker 2: So just a few more aspects of this. Yeah, it's
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  Speaker 2: just kind of interesting to get our head around it. Right,
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  Speaker 2: there's just so little information you do wonder, But yeah,
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  Speaker 2: Intel is in a weaker spot, and I guess we
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  Speaker 2: keep trying to think about what is the Intel of
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  Speaker 2: the future. The government, you know, and conversations we've had
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  Speaker 2: with you and with you and King about the importance
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  Speaker 2: of having Intel as a chip company in the United
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  Speaker 2: States is important for national security concerns, right, It's important
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  Speaker 2: for the United States. So you do wonder about something
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  Speaker 2: seems to have to happen to Intel going forward.
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  Speaker 4: Yeah, I also didn't really answer Matt's question, for which
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  Speaker 4: I apologize and both of your questions basically, well, isn't
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  Speaker 4: Intel in a perilous situation? And again go to the
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  Speaker 4: two parts of its business. It used to be a
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  Speaker 4: clear leader in many markets, which it's now a lot
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  Speaker 4: not You know, you guys know the story so well.
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  Speaker 4: In data centers, everybody wants in Vidia's GPU to train
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  Speaker 4: AI models. Intel didn't have one for quite a long time,
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  Speaker 4: but it also was over index towards CPUs a bit
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  Speaker 4: a more basic processor, and then demand fell away. On
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  Speaker 4: the foundry side, they wanted to be the factory for
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  Speaker 4: chip makers or chip designers all over the world, but
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  Speaker 4: they weren't really and that was why it was significant
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  Speaker 4: that they were able to name a WS as a
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  Speaker 4: customer to show that they could service a third party.
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  Speaker 4: But at the same time, running a business is about
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  Speaker 4: how much revenue're generating, how much you're spending to generate
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  Speaker 4: that revenue, and whatever your profit and losses are, and
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  Speaker 4: they had to do something desperate to react to that,
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  Speaker 4: which is all of the projects initiated in the last
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  Speaker 4: couple of years were reviewed and they cut back, they
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  Speaker 4: cut headcount, and so they seemed to be on a
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  Speaker 4: path forward, which again the timing of this, the Wall
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  Speaker 4: Street Journal's report is that Quowcom approached Intel, not necessarily
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  Speaker 4: that Intel was shopping at self or anything like that.
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  Speaker 2: Right, that's a big difference, isn't that a bit a
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  Speaker 2: big difference?
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  Speaker 1: Huge? Yeah?
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  Speaker 4: Yeah? And also you know, frankly, what this may get
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  Speaker 4: me in hot water? I don't know, but Pat Gelsinger's
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  Speaker 4: job was on the line, and as of the latest
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  Speaker 4: board meeting and strategy review, he survived, right, So I
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  Speaker 4: don't necessarily think that makes sense either from his perspective
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  Speaker 4: and trying to turn around the company.
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  Speaker 3: I just wonder about the two businesses and if you
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  Speaker 3: had to assign out of the ninety billion dollars in
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  Speaker 3: market cap, if you had to assign some of that
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  Speaker 3: to the design business and the rest to the foundry business,
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  Speaker 3: how's that breakdown?
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  Speaker 1: Look?
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  Speaker 2: Just quickly, kid, iou rot about thirty seconds.
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  Speaker 4: I'm trying to bring up fa go and give you
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  Speaker 4: the actual answer, and I can't. I'm not quick enough.
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  Speaker 4: But I think basically that at this point it's a
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  Speaker 4: pretty even split, but the future is predicated on foundry.
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  Speaker 2: Pretty wild, all right. You might have a busy weekend
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  Speaker 2: I imagine, sorry, and he.
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  Speaker 3: Looks so bombed down and had something plain tonight.
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  Speaker 4: You can tell it's like, honey, my wife watches this show,
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  Speaker 4: listen to this show.
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  Speaker 2: So yeah, all right.
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  Speaker 1: Ed Ludlow, of course, co host of Bloomberg Technology on
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  Speaker 1: Bloomberg Television.