Don't expect Qualcomm Inc.
Apollo Global Management
Benchmark analysts "believe Qualcomm's ultimate acquisition of Intel is logically unlikely," Acree says.
In addition to Qualcomm facing a "steep financial hurdle," such an acquisition would also invite a "high degree of regulatory scrutiny," Acree wrote in an analyst note Monday.
Benchmark understands Qualcomm's "attraction to the possibility of a combination of at least a portion of Intel," Acree says. Intel's chip design business, with its focus on the PC/notebook and server markets, is attractive, he adds.
Qualcomm would need to offer an attractive 40% to 50% premium to its current trading price of around $22 for shareholders to take the deal seriously, but the regulatory spotlight put on the transaction may be too intense to overcome, according to Acree.
Breakup fees would likely be $2 billion if the deal fell through.
Qualcomm abandoned an attempt to buy NXP Semiconductors in 2018. It cost the company $2 billion after China's state regulator rejected the proposal.
Nvidia Corporation's
Acree also said that Intel has had major design challenges over the past few years that have cost it market share to AMD in both personal computers and servers, and it lacks a competitive edge in artificial intelligence strategy.
"Ultimately, we're not convinced that Qualcomm will make a firm bid for Intel," he says.
Acree reiterated a Hold rating on Intel, a Buy rating on Qualcomm and reiterated a $240 price target for Qualcomm.
Price Action: Intel rose 1.65% to $22.20 in Monday's early-morning trading, while Qualcomm slipped 0.17% to $168.63.
