Can Intel make a comeback?

Bloomberg reported on Sunday, citing sources familiar with the matter, that private equity firm Apollo Global Management is willing to invest up to $5 billion in Intel in the form of equity investments.

Affected by the performance explosion, Intel's stock price has fallen by a cumulative 56% this year. At the same time, Intel is actively brewing a plan for 'self-rescue', including layoffs, divesting its chip outsourcing department, splitting product design and manufacturing business, and cutting factory investment projects.

In addition, there are reports that Qualcomm recently contacted Intel to discuss the possibility of acquiring Intel.

Apollo may invest up to $5 billion in Intel

On Sunday, September 22nd local time, according to Bloomberg, Apollo Global Management has proposed to invest billions of dollars in Intel, which would be a vote of confidence in the turnaround strategy for the chip manufacturer. Sources familiar with the matter revealed that the 'alternative' investment giant is willing to make an equity investment of up to $5 billion in Intel, and Intel executives are weighing Apollo's proposal.

The source further added that nothing has been finalized yet, the potential investment amount may change, and the negotiations could fail. Currently, both Apollo and Intel have declined to comment on this.

Financial reports show that Intel's revenue for the second quarter was $12.8 billion, a 1% decrease year-on-year; the attributable net loss was $1.6 billion, compared to a attributable net income of $1.5 billion in the same period last year, turning from profit to loss year-on-year; adjusted attributable net income under non-US GAAP was $0.1 billion, compared to $0.5 billion in the same period last year, a significant 85% decrease year-on-year.

After reporting a loss of $1.6 billion in the second quarter of this year, Intel CEO Pat Gelsinger has developed a plan to drastically cut costs by over $10 billion by 2025, including suspending dividends and planning to lay off 15,000 employees. Director Chen Liwu also unexpectedly left the board of directors at the end of August.

According to Reuters reports in early September, Pat Gelsinger and his executive team plan to submit a restructuring plan to the board of directors later in September, aiming to divest unnecessary businesses and optimize capital expenditures to save the fate of this former chip giant. The plan proposes to reduce costs by selling off parts of the business, especially the unviable programmable chip department Altera.

Due to layoffs, dividend suspensions, and a director's resignation, Intel's stock price has plummeted significantly in recent months. Market data shows that Intel's stock price has fallen by 56% this year, becoming the worst-performing stock in the Dow Jones Industrial Average index. Although Intel once dominated the chip industry, it has struggled to maintain an edge in the era of artificial intelligence, lagging behind chip giants such as Nvidia, AMD, and Taiwan Semiconductor.

Apollo Global Management is a company focused on non-traditional investment methods, with investment strategies including credit, private equity, real estate, and other areas. Different from traditional stock and bond investments, Apollo's non-traditional investment methods involve direct investment in private companies, distressed assets, special opportunity investments, and providing innovative financing solutions.

In fact, Apollo and Intel have established a partnership. In June of this year, Intel agreed to sell a portion of its shares in a factory in Ireland to Apollo. Under the agreement, Intel has agreed to sell 49% ownership of Fab 34 factory in Leixlip, Ireland to Apollo Global Management for $11 billion. The transaction is expected to be completed in the second quarter of 2024. This external financing has helped relieve Intel's financial pressure.

Can Qualcomm's takeover bid trigger the semiconductor industry's largest merger?

Shortly before Apollo approached Intel, another chip giant, Qualcomm, recently engaged with Intel to explore the possibility of acquiring this struggling chip manufacturer. If Qualcomm successfully acquires Intel, it would be the largest merger in the history of the semiconductor industry.

According to The Wall Street Journal, Qualcomm recently made a takeover bid for Intel. The report quoted sources saying that although the completion of this transaction is uncertain, Intel is open to Qualcomm's offer. However, a deal of this scale would also trigger antitrust review, and Qualcomm has been in communication with U.S. regulatory authorities, believing that the merger can alleviate any concerns.

Affected by this news, Intel rose sharply at the end of Friday, with an increase of 5.87%, triggering a trading halt. After the resumption of trading, the increase expanded to over 8%. However, by the close of the day, Intel's increase narrowed to 3.31%.

As of the close on Monday, Intel has risen over 3% for two consecutive days.

The Wall Street Journal believes that in order to complete the transaction, Qualcomm may consider selling some of Intel's assets or business. Reuters has reported that Qualcomm is interested in Intel's chip design business, but the Wall Street Journal points out that Qualcomm may choose to sell some of Intel's business to other buyers. The key issue lies in Intel's foundry business capacity depending on its chip design. If there is a lack of production capacity, its operation will face challenges. In addition, the cross-licensing agreement between Intel and AMD's x86/x86-64 may pose potential obstacles, as Qualcomm cannot produce chips based on Intel's design without renegotiation.

Regarding the acquisition rumors, representatives from Intel and Qualcomm have both declined to comment.

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