Wednesday, March 14, 2018
Intel is considering several acquisition possibilities in response to Broadcom's $117 billion bid for Qualcomm, including the possibility it may make a bid for Broadcom, according to a Wall Street Journal report.
The report, published March 9, cites anonymous sources. It says that Intel has been working with advisors since late last year to formulate an acquisition strategy to offset Broadcom's bid, which if ultimately successful would further redraw a semiconductor industry landscape already undergoing drastic changes as a result of a wave of mega-consolidation over the past few years.
Intel was not immediately available for comment on the Wall Street Journal report. Publicly traded firms rarely comment on potential acquisition targets.
Intel last year finished second in global semiconductor sales with revenue of $62.8 billion. Based largely on the strength of the memory chip market in 2017, South Korea's Samsung Electronics knocked Intel from the No. 1 sales spot it had occupied since 1992.
Intel, which still service the bulk of its revenue from PC processors, has for years been moving to diversify as the PC market has declined. Intel has, largely through acquisition, had some success penetrating newer markets such as the Internet of Things, connected cars, data centers, and baseband modem processors — where Qualcomm remains the dominant player.
The Wall Street Journal article, which characterizes an Intel bid for Broadcom as the most dramatic of a number of acquisitions Intel is considering, maintains that Intel is concerned that the acquisition of Qualcomm by Broadcom would create a powerhouse in both smartphones and data centers, two areas where Intel hopes to grow. The article noted that any attempt by Intel to acquire Broadcom is likely to face heavy scrutiny by antitrust regulators throughout the world.
Broadcom's bid to acquire Qualcomm — which has been rejected multiple times by Qualcomm's board of directors — faces longer odds after its raised concerns among the Committee for Foreign Investment in the United States (CFIUS), a multi-agency U.S. government panel that reviews potential acquisitions for U.S. national security implications. CFIUS said in a letter dated March 5 that the acquisition could threaten the U.S. position in wireless communications standards, patents, and products — potentially to the benefit of China.
In response to CFIUS concerns, Broadcom said last week it would invest to make the U.S. a leader in 5G technology, pledging to create a 1.5 billion fund with a focus on innovation to train and educate the next generation of RF engineers in the U.S. Broadcom also said it would not sell any critical national security assets to any foreign companies.
Qualcomm stockholders were to vote last week on whether to elect a slate of Broadcom nominees to Qualcomm's board, which would presumably favor the $117 billion offer from Broadcom that Qualcomm's board has rejected multiple times. However, at the request of CFIUS, the proxy vote by Qualcomm stockholders was pushed to April 5.
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