Intel stock climbs as Apollo Global Management (APO), the parent company of Yahoo Finance, reportedly offered a multibillion-dollar investment. That came after reports that Qualcomm (QCOM) approached Intel with a buyout offer. Stacy Rasgon, Bernstein managing director and senior analyst, joins Morning Brief hosts Brad Smith and Seana Smith to discuss the legacy chipmaker’s position amid reported takeover and investment opportunities. Rasgon tells Yahoo Finance he has “a hard time seeing that deal work, especially if the fabs are included, and the issue is that they’re losing a lot of money right now.” A fab is a semiconductor fabrication facility, a factory that makes chips. “Qualcomm would probably have to use a lot of stock. If they did a stock deal, it’s significantly dilutive for Qualcomm. It could be 20% or even more dilutive, and the problem is if they start borrowing money and adding cash, the leverage goes up really, really high, really, really quickly.” The analyst says, “I have a really hard time seeing it work with the fabs. I’m not sure that they could do a deal without the fabs,” as, in his view, they couldn’t spin off their fab businesses into independent companies, but they can’t scrap them. “I don’t think that that’s politically viable at this point,” as the US prioritizes its position in the global chip market. He adds, “I’d rather not see Qualcomm do a deal like this. I think it’s hard to do a deal where I think the risk would justify the returns on this. We’ll see if they can construct something. But I don’t really like it. So I’m hoping we don’t have something like this.” Regarding the potential Apollo investment, Rasgon highlights that Apollo has an existing relationship with Intel. The analyst says that while neither party has confirmed the reports that Apollo could invest up to $5 billion in Intel, the story could be viewed as “a vote of confidence” in the company. Rasgon says the regulatory side of a potential Qualcomm takeover is “really tough,” though he notes in the US it “could be easier” as its “a US national champion buying a national champion.” He says, “There are very few areas where Qualcomm and Intel really overlap,” with the auto space being one. He explains that Intel and Qualcomm have likely discussed Intel divesting from Mobileye (MBLY) if there is a takeover.
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