Qualcomm (QCOM.US) acquires Intel Corporation (INTC.US)? Kuo Ming-Chi said that Qualcomm should not have a strong motivation to carry out the acquisition.

According to informed sources, Qualcomm (QCOM.US) has explored the possibility of acquiring part of Intel Corporation's (INTC.US) chip design business to expand its product portfolio. Sources familiar with the matter said that Qualcomm executives are very interested in Intel Corporation's client PC design business, but they are considering all of the company's design departments. Intel Corporation is currently struggling to generate cash and is seeking to divest business units and sell other assets. Qualcomm, with a market capitalization of $184 billion, is known for producing smartphone chips, with Apple Inc. being one of its customers. Sources said that Qualcomm's interest in and plans for Intel Corporation have not been finalized and may change. In addition, Intel Corporation announced disastrous second-quarter results last month, including a 15% workforce reduction and suspension of dividend payments. Executives are working on how to continue funding the company's manufacturing plans and generating cash. Last year, in the overall weak personal computer market, Intel Corporation's client PC business revenue declined by 8% to $29.3 billion. Renowned Apple Inc. analyst Ming-Chi Kuo from TF International Securities today expressed his views on the rumor of Qualcomm seeking to acquire Intel Corporation on the social platform X. He said that the acquisition of Intel Corporation would only benefit Qualcomm's AI PC chip business, but with Microsoft Corporation's commitment to Windows on ARM (its latest Surface models all use Qualcomm processors/ARM architecture), Qualcomm's growth in the PC market is only a matter of time. Kuo also pointed out that considering Intel Corporation's market capitalization of about $93 billion, this merger would create significant financial pressure for Qualcomm, with an immediate negative impact on profitability, with net margins potentially dropping from over 20% to single digits or even losses (the foundry business being the biggest burden). Kuo said that given the antitrust investigations in various countries, this merger is unlikely to be completed in the short term. Therefore, Qualcomm may not have a strong motivation to acquire Intel Corporation. If this merger were to happen, it would be a disaster for Qualcomm. Kuo's original text is as follows: Qualcomm's current key focus is establishing competitiveness in AI chips. 1. Device-side AI phone chips: Qualcomm has a strong advantage in this area and is Apple's largest competitor. 2. Device-side AI PC chips: With the gradual optimization of Windows on ARM, Qualcomm's advantages will gradually emerge. 3. AI server chips: A weak area for Qualcomm. In the era of AI, Qualcomm's best strategy is to quickly monetize mobile AI chips and continue to promote PC AI chips, while simultaneously building a device-side (phone + PC) AI ecosystem advantage, and rapidly strengthening server AI chip advantage through investment and acquisitions. The acquisition of Intel would only benefit Qualcomm's AI PC chip business. But with Microsoft's commitment to Windows on ARM (its latest Surface models all use Qualcomm processors/ARM architecture), Qualcomm's growth in the PC market is only a matter of time. While acquiring Intel could quickly expand Qualcomm's market share in PC, the cost would be high, and even without this acquisition, Qualcomm can grow in the AI PC market with its own strengths. Intel's dominant position in the general server market has limited appeal to Qualcomm. AI servers are the future star of the server market, and AI servers happen to be a weak point for Intel at the moment. Qualcomm has about $13 billion in cash, cash equivalents, and marketable securities, with a market capitalization of about $190 billion. Even if we ignore the premiums, contingent expenses, debt burden, and subsequent management costs associated with the acquisition, just looking at Intel's market capitalization of about $93 billion, this merger would create significant financial pressure for Qualcomm, with an immediate negative impact on profitability, with net margins potentially dropping from over 20% to single digits or even losses (the foundry business being the biggest burden). Qualcomm's latest quarterly capital expenditure was about $390 million. Using the funds for acquiring Intel (estimated to be over $100 billion) to expand capital expenditures for AI PC and AI server growth would result in lower risks and higher management efficiency. Considering the antitrust investigations in various countries, the completion of this merger is unlikely in the short term. Should Qualcomm divest some Intel assets to reduce financial and management pressure from the merger, it would still not be a swift decision. During the uncertainties in this merger process, the trading atmosphere for Qualcomm's stock price would not be favorable. Therefore, Qualcomm may not have a strong motivation to acquire Intel. If this merger were to happen, it would be a disaster for Qualcomm. From my investigation and understanding, Qualcomm seems to have a cautious and passive attitude towards acquiring Intel in internal discussions. This indicates that Qualcomm may be evaluating the feasibility of the acquisition due to external pressures that are difficult to resist.