Qualcomm’s Potential Acquisition of Intel? ‘Almost Too Silly to Comment On,’ Says Citi

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

Citi argues that such a takeover would be harmful to Intel’s shareholders, highlighting Qualcomm’s lack of experience in operating fabrication facilities and its historically elevated operating costs.

Instead, analysts suggest that Intel should concentrate on divesting its foundry operations, a strategy they believe would benefit shareholders. The foundry sector reportedly suffered a loss of $2.8 billion last quarter and is anticipated to incur approximately $8 billion in annual losses, which, according to the investment firm, severely limits its chances of achieving profitability.

Citi speculates that exiting the foundry business could improve 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.

While acknowledging the need for Intel to exit its foundry division, Citi advises that the company should retain its CPU manufacturing capabilities. The firm emphasizes the benefits of maintaining synergies between CPU design and manufacturing, arguing against a transition to a fabless model, as they expect Intel to close the gap with competitors by 2025.

Citi has maintained its Neutral rating on Intel, setting a price target of $25 for the company. They project that Intel’s EPS will face pressure due to its foundry operations, which they believe have minimal prospects for success.