Qualcomm’s Potential Acquisition of Intel? Citi Calls It “Almost Too Silly to Comment On”

A recent report suggested that Qualcomm had reached out to Intel regarding a possible acquisition. However, analysts from Citi have dismissed this notion, labeling it as “almost too silly to comment on.”

Citi analysts contend that such a merger would harm Intel shareholders, pointing to Qualcomm’s lack of expertise in operating semiconductor fabrication plants and its historically elevated operational costs.

The firm believes Intel should concentrate on divesting its foundry business, a strategy they argue would be more beneficial for shareholders. The foundry segment reportedly incurred a loss of $2.8 billion last quarter and is anticipated to face annual losses of around $8 billion. According to Citi, the prospects for this division to turn profitable are quite slim.

They estimate that exiting the foundry business could potentially increase Intel’s earnings per share (EPS) to a range of $3.00 to $4.00 and elevate gross margins to the low to mid-50% range.

Citi supports the idea of Intel stepping away from its foundry operations, but advises that the company should retain its CPU manufacturing capabilities due to the synergies with CPU design. The analysts do not advocate for Intel to adopt a fabless model, especially with the goal of catching up to TSMC by 2025.

The firm has maintained a Neutral rating on Intel, setting a price target of $25. They anticipate that Intel’s EPS will face pressure as a result of its foundry business, which they believe has limited potential for success.