Intel Rejects Arm’s Proposal to Acquire Product Unit – Report

Arm Holdings Plc recently approached Intel Corp to discuss the possibility of acquiring its struggling product division, but Intel has made it clear that the unit is not for sale, according to reports from Bloomberg. Sources familiar with the discussions, who requested anonymity, indicated that Arm was not interested in Intel’s manufacturing operations.

Intel operates through two main divisions: one focuses on developing chips for PCs, servers, and networking equipment, while the other manages its manufacturing facilities.

Historically, Intel was the leading chipmaker worldwide; however, this year it has faced intense scrutiny due to a significant drop in business performance and subsequent speculation about potential takeovers. Recently, the company reported disappointing earnings, leading to its largest share price drop in decades. As part of its cost-cutting measures, Intel plans to eliminate 15,000 jobs, reduce factory expansion, and suspend its long-standing dividend.

In a strategic restructuring effort, Intel is separating its chip product division from its manufacturing operations. This approach aims to attract external customers and investors and may pave the way for a potential company split, as indicated by earlier reports.

Arm, which is primarily owned by Japan’s SoftBank Group, mainly generates revenue through licensing chip designs for smartphones. However, CEO Rene Haas is actively working to expand Arm’s footprint in the PC and server markets, where it currently competes with Intel. Even though Intel has lost some technological edge, it remains a dominant player in these sectors.

A partnership with Intel could broaden Arm’s market reach and advance its strategy to offer more comprehensive products. Currently, Arm licenses its designs to other companies that produce the final components, including major tech firms like Amazon, Qualcomm, and Samsung.

Under Haas’s leadership, Arm is transitioning towards delivering more fully developed products, which may bring it into competition with its licensees. Despite being smaller in size, Arm’s market value surged after its recent IPO, now exceeding $156 billion. Investors consider Arm a significant contender in the expanding AI market, especially as it places more emphasis on data center chips. With SoftBank holding an 88% stake, Arm possesses substantial financial backing.

Conversely, Intel’s market capitalization has fallen by over half this year, currently at $102.3 billion. Nevertheless, Intel has alternatives; for instance, Apollo Global Management has recently proposed an investment of up to $5 billion in the company, showing support for CEO Pat Gelsinger.

Additionally, Intel is planning to divest part of its stake in Altera Corp., a semiconductor firm it acquired in 2015, to private equity investors. Altera was separated from Intel’s operations last year with plans for an eventual public offering. Recent acquisition speculation involving Qualcomm has also provided a boost to Intel’s stock price.