From the Wall Street Journal via MSN, September 24:
Intel has never been this cheap. That doesn’t make the storied chip maker a great deal.
Once the world’s most dominant designer and producer of advanced semiconductors, Intel’s stock price has collapsed this year as its problems have mounted. The company’s disastrous second-quarter report in early August put its market capitalization below $100 billion for the first time since 2012. It also pushed the stock below the company’s book value—largely consisting of factories and intellectual property minus its net borrowings—for the first time in at least four decades, according to data from FactSet.
Such an epic crash understandably draws out bargain hunters looking to kick the tires. The Wall Street Journal reported Friday that Qualcomm has made a takeover approach, though at what price and other terms couldn’t be learned. It wouldn’t exactly be a minnow swallowing a whale; Qualcomm’s projected revenue over the next 12 months is more than three-quarters of what Intel is expected to produce.
Still, even a modest takeout premium would put the deal’s value over $100 billion. That is about eight times the cash on Qualcomm’s balance sheet and would involve substantial debt or significant dilution of the company’s shareholders—or likely both. Wall Street has serious doubts. Qualcomm’s shares fell nearly 2% Monday after slipping nearly 3% Friday.
“We are skeptical of the merits of any potential transaction,” wrote Vivek Arya of BofA Securities in a report. Chris Danely of Citigroup was even more direct. “Almost too silly to comment on,” he wrote in a note to clients....
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