WEBVTT - Instant Reaction: Qualcomm Approached Intel About A Takeover Deal

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Qualcom has, it seems to have approached Intel, according to

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<v Speaker 2>people familiar. Again, just a headline from the Wall Street Journal.

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<v Speaker 2>You've got chairs of Intel up about four percent as

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<v Speaker 2>we speak. You've got shares of Qualcomm down about four

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<v Speaker 2>percent as we speak. So let's get to it with

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<v Speaker 2>one of the co hosts of Bloomberg Technology on Bloomberg TV,

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<v Speaker 2>and that is of course Ed Ludlow out there. One

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<v Speaker 2>of the best people we could talk to.

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<v Speaker 3>Ed Ludlow has sat down with interviews of all with

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<v Speaker 3>all the most important CEOs in Silicon Valley, but he's

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<v Speaker 3>especially familiar with Pat Gelsinger. So I think he's a

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<v Speaker 3>great guy to talk to you on this.

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<v Speaker 2>All right, So what do we know? What do you think?

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<v Speaker 4>I think, well, what we know very little. The Journal

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<v Speaker 4>the basics are is reporting, citing anonymous sources, that Quowcom

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<v Speaker 4>made an approach to Intel in the last few days,

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<v Speaker 4>and they state in their report that actually they do

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<v Speaker 4>not have a sense of how receptive Intel is to

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<v Speaker 4>such a deal. The context is that it's out of

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<v Speaker 4>left field. For two reasons. Intel's just gone through a

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<v Speaker 4>massive restructuring, which we can discuss the details of but

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<v Speaker 4>also for Qualcom, it doesn't really make any sense. Historically,

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<v Speaker 4>Qualcomm is a company that designed semiconductors that goes into

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<v Speaker 4>your smartphone. More recently, they've really wanted to move into

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<v Speaker 4>the PC field, which historically Intel has dominated, and Qualcom

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<v Speaker 4>has made inroads into that market with their own technology.

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<v Speaker 4>The thing that we don't know is which bit of

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<v Speaker 4>Intel would Qualcom on paper want to buy. And so

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<v Speaker 4>that's why I bring up those two points, because if

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<v Speaker 4>they wanted Intel's PC business, it would be a departure

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<v Speaker 4>from the strategy so far which has worked. If they

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<v Speaker 4>want the foundry business, that the business of manufacturing semiconductors,

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<v Speaker 4>that's a different kettle official together.

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<v Speaker 3>Well, and are those two businesses going to be separated?

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<v Speaker 3>Is that something that Gelsinger is really considering moving forward on.

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<v Speaker 4>Yes. So the rece news of the week is that

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<v Speaker 4>Intel is going through a second or restructuring or rethink

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<v Speaker 4>under Pat Gelsinger. And the biggest part of that is

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<v Speaker 4>where the foundry business or the manufacturing business is its

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<v Speaker 4>own standalone entity, its own subsidiary, and this subsidiary would

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<v Speaker 4>manufacture semiconductors for Intel. Intel designs chips for PCs and

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<v Speaker 4>for data centers, servers, and a number of other things.

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<v Speaker 4>But it would also manufacture them for third parties. The

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<v Speaker 4>Qualcom story, and again we do not know this. All

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<v Speaker 4>we know is that Qualcom made an approach for Intel,

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<v Speaker 4>and we don't have any of the financial terms that

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<v Speaker 4>were offered. But Qualcom has no experience in manufacturing chips.

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<v Speaker 4>On this show, Carol, I think I've said this to

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<v Speaker 4>you so many times in the last few weeks. Yeah,

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<v Speaker 4>but we call these companies chip makers. They are not.

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<v Speaker 4>They are chip designers and a third party manufactures it

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<v Speaker 4>for them. So maybe Quilcom looks at Intel and goes,

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<v Speaker 4>that would be quite convenient to have our own manufacturing

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<v Speaker 4>footprint here in the United States, because that part of

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<v Speaker 4>Intel's business is kind of humming.

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<v Speaker 1>Well, you know what's funny is the headline initially crossed.

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<v Speaker 1>I'm like, okay, this is an Intel story, Like is

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<v Speaker 1>Intel getting a lifeline? Like you know, we've talked with

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<v Speaker 1>the inking who's done great dives as you know, into

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<v Speaker 1>how Intel got to where it is today. Having said that,

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<v Speaker 1>I thought, how much of this is a quad Comm story?

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<v Speaker 1>Qualcom looking to transform itself in a different way right.

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<v Speaker 4>I'm just dotting the eyes and crossing the t's. But

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<v Speaker 4>I got the emails in my inbox. Intel declines to comment,

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<v Speaker 4>so I just just doing that, you know, because it's

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<v Speaker 4>a you know again, the Wall Street Journal story is

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<v Speaker 4>one citing anonymous sources, and neither company is commenting. It's

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<v Speaker 4>really difficult to answer. Should we do some math together

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<v Speaker 4>on how feasible such a deal would be. Qualcom has

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<v Speaker 4>a market cap of about one hundred and eighty five

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<v Speaker 4>billion dollars. Intel has a market cap of around ninety

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<v Speaker 4>billion dollars. Qualcom has thirteen billion dollars on It's a

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<v Speaker 4>balance sheet of cash and crash equivalents, and then there's antitrust.

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<v Speaker 4>I'm not I just said on TV to Addict Steele

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<v Speaker 4>and Vonnie Quinn. I'm not a banker, guys. I'm a journalist,

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<v Speaker 4>but I do have some experience in reporting on deals,

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<v Speaker 4>and I don't know how one would finance such a venture.

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<v Speaker 3>Don't undersell yourself, thank you, you know. To me, it

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<v Speaker 3>seems like if you're going to strike, now is a

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<v Speaker 3>pretty good time because Intel is on its knees. I mean,

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<v Speaker 3>they have plans to build factories and people aren't really

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<v Speaker 3>sure if they're going to be able to go through

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<v Speaker 3>with it. I know the federal government is aching to

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<v Speaker 3>give them billions and billions of dollars, but they're having

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<v Speaker 3>to figure out ways to do that, you know, finding

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<v Speaker 3>them clients essentially. So I mean, if you're going to

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<v Speaker 3>buy Intel at all, I mean, it's better surely to

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<v Speaker 3>do it after their stock has fallen sixty percent year

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<v Speaker 3>to date.

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<v Speaker 4>Yeah, there is an element of timing, you know, and

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<v Speaker 4>you can talk about you state performance or even the

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<v Speaker 4>performance of the last two years for both companies. Relatively speaking,

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<v Speaker 4>it's just for me, like the technology story doesn't make

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<v Speaker 4>a lot of sense, you know. We interviewed Christiano Ammon,

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<v Speaker 4>the Quowdcom CEO, many times in the last two years,

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<v Speaker 4>and on earnings in particular, it took a long time

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<v Speaker 4>for investors to give him credit for his vision of

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<v Speaker 4>moving Qualcom beyond a company that did one thing, which

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<v Speaker 4>is the RF chip in your phone and the modem

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<v Speaker 4>in your phone, particularly on behalf of the likes of Apple, right.

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<v Speaker 4>He wanted Qualcom to design semiconductors that did all kinds

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<v Speaker 4>of things in cars and now PCs. He wanted to

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<v Speaker 4>be at the cutting edge of virtual augmented reality headsets,

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<v Speaker 4>and it took a lot of time to show up

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<v Speaker 4>in the financials, but it is now showing up in

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<v Speaker 4>the financials, and so you know, forget the foundry business

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<v Speaker 4>for a second. Intel has all these products across PC

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<v Speaker 4>and data center that Qualcom is now being competitive in

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<v Speaker 4>but in its own right. So why you know, from

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<v Speaker 4>a technology perspective, it doesn't make a lot of sense either.

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<v Speaker 2>Look at that the journals. I know you've been looking

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<v Speaker 2>at it as well. A deal far from certain. The

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<v Speaker 2>people cautioned to get the deal done. Qualcom could intend

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<v Speaker 2>to sell assets or parts of Intel to other buyers.

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<v Speaker 2>So just a few more aspects of this. Yeah, it's

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<v Speaker 2>just kind of interesting to get our head around it. Right,

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<v Speaker 2>there's just so little information you do wonder, But yeah,

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<v Speaker 2>Intel is in a weaker spot, and I guess we

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<v Speaker 2>keep trying to think about what is the Intel of

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<v Speaker 2>the future. The government, you know, and conversations we've had

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<v Speaker 2>with you and with you and King about the importance

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<v Speaker 2>of having Intel as a chip company in the United

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<v Speaker 2>States is important for national security concerns, right, It's important

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<v Speaker 2>for the United States. So you do wonder about something

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<v Speaker 2>seems to have to happen to Intel going forward.

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<v Speaker 4>Yeah, I also didn't really answer Matt's question, for which

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<v Speaker 4>I apologize and both of your questions basically, well, isn't

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<v Speaker 4>Intel in a perilous situation? And again go to the

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<v Speaker 4>two parts of its business. It used to be a

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<v Speaker 4>clear leader in many markets, which it's now a lot

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<v Speaker 4>not You know, you guys know the story so well.

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<v Speaker 4>In data centers, everybody wants in Vidia's GPU to train

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<v Speaker 4>AI models. Intel didn't have one for quite a long time,

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<v Speaker 4>but it also was over index towards CPUs a bit

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<v Speaker 4>a more basic processor, and then demand fell away. On

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<v Speaker 4>the foundry side, they wanted to be the factory for

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<v Speaker 4>chip makers or chip designers all over the world, but

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<v Speaker 4>they weren't really and that was why it was significant

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<v Speaker 4>that they were able to name a WS as a

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<v Speaker 4>customer to show that they could service a third party.

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<v Speaker 4>But at the same time, running a business is about

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<v Speaker 4>how much revenue're generating, how much you're spending to generate

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<v Speaker 4>that revenue, and whatever your profit and losses are, and

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<v Speaker 4>they had to do something desperate to react to that,

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<v Speaker 4>which is all of the projects initiated in the last

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<v Speaker 4>couple of years were reviewed and they cut back, they

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<v Speaker 4>cut headcount, and so they seemed to be on a

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<v Speaker 4>path forward, which again the timing of this, the Wall

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<v Speaker 4>Street Journal's report is that Quowcom approached Intel, not necessarily

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<v Speaker 4>that Intel was shopping at self or anything like that.

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<v Speaker 2>Right, that's a big difference, isn't that a bit a

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<v Speaker 2>big difference?

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<v Speaker 1>Huge? Yeah?

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<v Speaker 4>Yeah? And also you know, frankly, what this may get

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<v Speaker 4>me in hot water? I don't know, but Pat Gelsinger's

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<v Speaker 4>job was on the line, and as of the latest

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<v Speaker 4>board meeting and strategy review, he survived, right, So I

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<v Speaker 4>don't necessarily think that makes sense either from his perspective

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<v Speaker 4>and trying to turn around the company.

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<v Speaker 3>I just wonder about the two businesses and if you

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<v Speaker 3>had to assign out of the ninety billion dollars in

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<v Speaker 3>market cap, if you had to assign some of that

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<v Speaker 3>to the design business and the rest to the foundry business,

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<v Speaker 3>how's that breakdown?

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<v Speaker 1>Look?

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<v Speaker 2>Just quickly, kid, iou rot about thirty seconds.

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<v Speaker 4>I'm trying to bring up fa go and give you

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<v Speaker 4>the actual answer, and I can't. I'm not quick enough.

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<v Speaker 4>But I think basically that at this point it's a

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<v Speaker 4>pretty even split, but the future is predicated on foundry.

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<v Speaker 2>Pretty wild, all right. You might have a busy weekend

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<v Speaker 2>I imagine, sorry, and he.

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<v Speaker 3>Looks so bombed down and had something plain tonight.

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<v Speaker 4>You can tell it's like, honey, my wife watches this show,

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<v Speaker 4>listen to this show.

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<v Speaker 2>So yeah, all right.

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<v Speaker 1>Ed Ludlow, of course, co host of Bloomberg Technology on

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<v Speaker 1>Bloomberg Television.