intel receives $5 billion investment, where will it go?
2024-09-24
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bloomberg recently quoted people familiar with the matter as saying that apollo global management has proposed a multi-billion dollar investment plan to intel. the person familiar with the matter said that the company recently expressed its willingness to make an equity investment of up to $5 billion in intel; intel executives are considering apollo's proposal.
under chief executive pat gelsinger, intel has been pursuing a costly plan to reshape itself and introduce new products, technologies and external customers, which has led to a series of earnings deteriorations, undermined investor confidence in intel and wiped tens of billions of dollars off its market value, bloomberg said.
it is worth noting that although apollo is now known for its insurance, business acquisition and credit strategies, the company started out as a company focused on distressed investments in the 1990s. according to reports, intel and apollo already have business dealings. in june this year, intel agreed to sell part of its stake in a joint venture factory in ireland to apollo for $11 billion, bringing more external funds to its massive expansion of its factory network.
apollo has other experience in chipmaking, too. last year, it agreed to lead a $900 million investment in western digital corp. for convertible preferred stock.
the above-mentioned person familiar with the matter also added that the details of the investment case have not yet been finalized, the potential investment scale may change, and there is a possibility that the negotiations will fail.
in addition to this unclear investment plan, intel has also recently made more capital moves. it is reported that qualcomm has recently approached intel about an acquisition, and the potential transaction will face antitrust review and require asset divestiture. in addition, this possible transaction has not yet made a formal offer.
reuters reported that qualcomm ceo cristiano amon was personally involved in the talks to acquire intel, which would be the largest takeover attempt in the tech industry since broadcom attempted to buy qualcomm for $142 billion in 2018.
broadcom's previous acquisition plan was rejected by then-us president trump on the grounds of "national security risks." similarly, qualcomm's attempt to acquire intel will also face many challenges. for example, the deal may be reviewed by antitrust regulators in the united states, china and europe. qualcomm may need to divest some of intel's assets to obtain regulatory approval.
in addition, the current market news is unclear how qualcomm, which has $13 billion in cash and a market value of $188 billion, will raise funds to acquire intel, which is valued at $122 billion (including debt). at the same time, intel has invested hundreds of billions of dollars in its manufacturing processes over the past decades and has gathered tens of thousands of engineers for this purpose. qualcomm has never operated a chip factory, and the market is not clear about how qualcomm will deal with the acquisition of intel's foundry business.
intel has recently fallen into a development dilemma, and investors have been questioning it. once the world's largest chipmaker, intel's operating conditions have been declining for years, and this trend has accelerated further in 2024. in august of this year, the company released an earnings report that disappointed investors, causing its stock price to record the largest single-day drop in more than 50 years. investors have expressed doubts about the company's expensive chip manufacturing and design plans, and intel's stock price has fallen 54% this year.
as intel has lagged behind rival nvidia in the recent generative ai boom, it has been trying to turn around its business by focusing on ai processors and creating a chip contract manufacturing business, known as a foundry. according to the us consumer news and business channel website, gelsinger recently reiterated the company's commitment to investing heavily in the foundry business in a memo to employees, a project that could cost $100 billion over the next five years.
in addition, gelsinger and other executives have recently proposed a plan to cut business and restructure the company, including suspending factory construction in poland and germany and reducing its real estate holdings. intel also said it would produce customized network chips for amazon's aws.
source: economic information daily
