.September 23, 2024 04:34:00 PM

Qualcomm reportedly approached Intel for a potential acquisition, but Citi analysts dismissed the idea, deeming it unfeasible and detrimental to Intel shareholders.

Citi analysts argue that Qualcomm lacks experience in semiconductor fabs and has high operating costs, making an acquisition problematic. They suggest Intel should focus on divesting its foundry business, which incurred a $2.8 billion loss last quarter and is projected to lose $8 billion annually.

Exiting the foundry sector could boost Intel’s EPS to $3.00-$4.00 and increase gross margins to the low-to-mid 50% range, according to Citi estimates. The firm advises Intel to keep its CPU manufacturing business for synergies with design.

Citi recommends Intel not shift to a fabless model, predicting the company will catch up with TSMC’s technology by 2025. The analysts believe Intel’s EPS will continue to suffer if it maintains the struggling foundry business, which they view as unlikely to succeed.