INTC Intel Corporation

By Dana Mattioli and Dana Cimilluca 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 10, 2018).

Intel Corp. is considering a range of acquisition alternatives in reaction to Broadcom Ltd.'s hostile pursuit for Qualcomm Inc. that could include a bid for Broadcom, according to people familiar with the matter.

Intel is watching the takeover battle closely and is eager for Broadcom to fail as the combined company would pose a serious competitive threat, the people said. If it becomes apparent that Broadcom is likely to prevail, Intel could step in with its own offer for Broadcom, the people said.

Intel has been considering such a move since late last year and is working with advisers, some of the people said. It is far from guaranteed that Intel would ultimately make such a move -- one of the people said it is unlikely -- and the complexity and size of such a combination would be enormous. Broadcom currently has a market value of about $104 billion.

It is also possible that Intel ultimately decides to make other, smaller acquisitions, one of the people said.

The news of Intel's review adds a new twist to a takeover drama that has been unfolding since late last year. Broadcom has waged a monthslong hostile fight to take over Qualcomm, which would reshape the semiconductor industry and have major ramifications for competitors such as Intel.

It also shows the extent to which a Broadcom-Qualcomm tie-up would upend the semiconductor industry.

Intel and Qualcomm are fierce rivals and Intel has been working to chip away at Qualcomm's strong position in making equipment for wireless devices, namely those from Apple Inc. Qualcomm and Apple have been in a bitter licensing dispute and Apple lately has switched to Intel chips in a portion of its devices. Should Broadcom succeed in buying Qualcomm, it could smooth over relations with Apple, closing a door to further possible gains from Intel.

A Broadcom deal would be Intel's biggest acquisition by far -- and should it pursue one, there is no guarantee regulators would bless it. Intel, based in Santa Clara, Calif., and with a market value of nearly $240 billion, has been acquisitive in recent years as it looks to diversify away from its core business of powering the personal-computer industry, which is in decline.

Last year, Intel bought Israeli car-camera pioneer Mobileye NV for roughly $15.3 billion in a bet on connected cars. In 2015, it struck its largest deal ever when it bought Altera Corp. for $16.7 billion. Intel hoped that buying Altera, a maker of programmable chips, would help bolster its position in server systems and other equipment found in data centers and telecommunications networks, the company said at the time, as well as fuel its plans surrounding the so-called Internet of Things.

In the most recent piece of drama surrounding Broadcom's bid to buy Qualcomm, the effort was dealt a setback when the Committee on Foreign Investment in the U.S., or CFIUS, indicated it has concerns about the takeover and would review it.

That appeared to lengthen the odds that Broadcom and its chief executive, Hock Tan, would succeed in their pursuit of Qualcomm, which has rejected the $117 billion offer as too low.

Separately, Qualcomm has in place its own pending $44 billion deal to buy NXP Semiconductors NV, which it sweetened in February, a move Broadcom criticized.

Qualcomm and Broadcom unleashed dueling announcements Friday as each sought to win support from regulators and shareholders during the takeover fight.

Qualcomm, looking to assert its board's independence, said Paul Jacobs would no longer be executive chairman. Mr. Jacobs, the son of Qualcomm co-founder Irwin Jacobs, will remain on the board. Current board member Jeffrey Henderson was named nonexecutive chairman.

Broadcom has been seeking to replace a majority of Qualcomm's board members to help pave the way for a deal. A vote on the directors that was slated to take place this past Tuesday at Qualcomm's annual meeting was pushed back a month at CFIUS's behest.

Broadcom, meanwhile, pledged that if it succeeds in acquiring its target, it wouldn't sell "any critical national security assets to any foreign companies." The assurance was a nod to U.S. concerns that a takeover could weaken Qualcomm's position -- and therefore the country's standing -- as a leader in developing next-generation 5G cellular technology.

Broadcom late Friday said it will ask shareholders to vote March 23 to approve the company's plan to redomicile from Singapore to the U.S., potentially setting the stage for a showdown with CFIUS as the vote would take place in the middle of the panel's review of Broadcom's bid.

If Broadcom were considered a U.S. company, its acquisition would arguably fall outside of the panel's jurisdiction, though CFIUS could say it still has jurisdiction to review the bid since it began the review while Broadcom was a Singapore company.

Should Broadcom fail in its bid for Qualcomm, it is possible Intel would stand down, happy with the status quo.

Underlying the maneuvering is a battle among chip companies to be the chief supplier of critical cellular components to smartphone makers such as Apple and Samsung Electronics Co.

Qualcomm is a leader in chips that run apps and manage cellular communications in smartphones. It competes with Broadcom in chips for short-range wireless networking, including Bluetooth and Wi-Fi, and radio filters and other chips that condition cellular signals.

Intel, which dominates the market for the calculating engines in personal computers and data-center servers, missed the mobile revolution when its chips proved too power-hungry for battery-dependent cellphones. But Intel's cellular communications chips lately have displaced Qualcomm's in a portion of Apple's iPhones, and the company has been moving aggressively to develop that product line.

Acquiring Broadcom would give Intel a suite of smartphone chips, adding to its own communications chips the Singapore-based company's radio filters as well as Bluetooth and GPS components.

Broadcom sells a diverse line of equipment for networking and communications -- including technology for smartphones from Apple and Samsung -- as well as data storage, electronic displays and set-top boxes. Broadcom, like Qualcomm, is a so-called fabless chip company, designing processors while relying on manufacturers such as Taiwan Semiconductor Manufacturing Co. to actually make them.

Under Mr. Tan, Broadcom has pursued a string of acquisitions. The company was formed when Avago Technologies Ltd. in 2015 agreed to buy the former Broadcom for roughly $37 billion and kept its name. Broadcom's revenue was twice the size of Avago's at the time of the merger.

Write to Dana Mattioli at dana.mattioli@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

(END) Dow Jones Newswires

March 10, 2018 02:47 ET (07:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.