Arm Holdings Approaches Intel for Acquisition

Arm Holdings Plc (NASDAQ:ARM) approached Intel Corp (NASDAQ:INTC) to explore the possibility of acquiring its struggling product division, but Intel responded that the unit was not for sale, Bloomberg News reported.

The source, who requested anonymity due to the confidential nature of the discussions, stated that Arm was not interested in Intel’s manufacturing operations.

Arm shares were down 1.4% in premarket Friday trading, while Intel slipped 0.8%.

Intel’s Divisions and Performance Challenges

Intel is divided into two key divisions: a product group developing chips for PCs, servers, and networking equipment, and a manufacturing division managing its factories.

Once a leading chipmaker, Intel has faced speculation of a takeover after a decline in business performance this year. The company reported disappointing earnings, leading to the steepest decline in its share price in decades. Intel has responded by cutting 15,000 jobs, scaling back factory expansion, and suspending its long-standing dividend.

As part of its restructuring, Intel is separating its chip product division from its manufacturing operations to attract external customers and investors, potentially paving the way for a company split.

Arm’s Strategy and Growth

Arm, majority-owned by Japan’s SoftBank Group Corp. (TYO:9984), generates most revenue from licensing chip designs for smartphones. CEO Rene Haas aims to expand Arm’s presence in the PC and server markets, which compete directly with Intel. Despite losing some technological edge, Intel remains a market leader.

A partnership with Intel could expand Arm’s market reach and enhance its strategy to sell more complete products. Currently, Arm licenses designs to other companies that build the final components, with clients like Amazon (NASDAQ:AMZN), Qualcomm (NASDAQ:QCOM), and Samsung (KS:005930).

Under Haas’s leadership, Arm has shifted towards offering fully developed products, which could challenge its licensees. Despite its smaller size, Arm’s market value surged over $156 billion following its IPO last year. Investors see it as a key player in the growing AI market, especially with its focus on data center chips. With SoftBank owning an 88% stake in Arm, the company has considerable financial backing.

Intel’s Financial Position and Future Prospects

In contrast, Intel’s market capitalization has dropped by more than half this year, now at $102.3 billion. However, Intel has options for recovery. Apollo Global Management (NYSE:APO) recently offered to invest up to $5 billion in Intel, showing support for CEO Pat Gelsinger.

Additionally, Intel plans to sell part of its stake in Altera Corp., a semiconductor company it acquired in 2015, to private equity investors. Intel separated Altera from operations last year, intending to take it public. Speculation about a Qualcomm acquisition has also helped boost Intel’s stock price.