An Intel deal for GlobalFoundries could either be a ‘huge distraction’ or a ‘great fit’

4 months ago 30
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Analysts are divided connected the merits of a imaginable woody betwixt Intel Corp. and GlobalFoundries aft a study indicated that Intel has engaged successful merger discussions.

The Wall Street Journal reported Thursday that Intel INTC, -0.37% has held talks astir a imaginable acquisition of spot shaper GlobalFoundries in a woody that could beryllium valued astatine astir $30 billion. Global Foundries is presently owned by the concern limb of the Abu Dhabi government.

An Intel spokeswoman said that the institution “does not remark connected rumors oregon speculation.”

Shares of Intel are adjacent level successful Friday greeting trading.

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Intel’s caller main enforcement Pat Gelsinger has acceptable retired to turn the company’s foundry operations and manufacture chips for different companies. A imaginable acquisition of GlobalFoundries could supply other manufacturing capableness and a lawsuit base, but immoderate analysts person questions astir whether the woody would marque sense.

“While taking connected GF’s capableness would enable Intel to accelerate their foundry strategy, we deliberation specified a determination would permission investors to question Intel’s determination for capableness footprint vs. the quality to utilize GF for leading-edge process node capabilities (reminder: successful 2018 GF abandoned enactment connected its 7-nanometer merchandise efficaciously ceding the leading-edge contention to TSMC TSM, -1.33%,  Intel, and Samsung),” wrote Wells Fargo’s Aaron Rakers, who has an adjacent value standing connected Intel’s banal and a $70 terms target.

Bernstein’s Stacy Rasgon made a akin point. “While a credible root for trailing node & specialty products, GloFo has stopped leading-edge manufacturing and tin bash thing to assistance Intel’s woes connected this front,” helium wrote successful a enactment to clients.

He besides raised concerns astir the economics of GlobalFoundries’ business, particularly successful the discourse of the $30 cardinal terms from the reported woody talks. His mentation of disclosures from Mubadala, the Abu Dhabi concern arm, signals that GlobalFoundries hasn’t been profitable and would apt beryllium dilutive to Intel’s margins.

“A woody similar this seems astir definite to beryllium a immense distraction,” helium said, portion maintaining an underperform standing and $43 people connected the stock.

GlobalFoundries didn’t instantly respond to MarketWatch’s petition for remark connected the woody talks oregon whether the institution has been profitable.

Baird expert Tristan Gerra was much upbeat successful a enactment titled “High Stakes, High Rewards,” which reiterated his statement that Intel needs to marque an acquisition to win with its caller foundry ambitions.

He believes a woody with GlobalFoundries “would beryllium strategical and connection a large fit” for Intel, noting that it could assistance diversify Intel’s extremity markets, including successful the automotive space.

“The stakes are high, and a palmy Foundry Services concern would person precise affirmative implications for Intel’s valuation rerating implicit time, successful our view,” helium wrote, portion reiterating an outperform standing and $85 target. “The acquisition of Global Foundries would champion conscionable Intel’s halfway competencies goals, successful our view.”

Rosenblatt Securities expert Hans Mosesmann wrote that helium would presumption a woody arsenic “making consciousness arsenic a mode for Intel to execute bequest scale, and a mode for the institution to entice subsidies from occidental countries.” He doesn’t expect that specified a woody would person immoderate interaction connected leading-edge manufacturers similar Advanced Micro Devices Inc. AMD, -0.32%

Mosesmann has a merchantability standing connected Intel’s stock.

Intel’s banal has declined astir 6% implicit the past 12 months, portion AMD shares person soared 57%. In comparison, the PHLX Semiconductor Index SOX, -0.92% has climbed 55% and the Dow Jones Industrial Average DJIA, -0.26% has rallied 30%.

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