Investing.com — Arm Holdings Plc (NASDAQ:) approached Intel Corp (NASDAQ:). to explore the possibility of acquiring the troubled product division, but Intel responded that the unit was not for sale, Bloomberg News reported Friday, citing a source with direct knowledge of the matter.
The source, who requested anonymity due to the confidential nature of the talks, said Arm was not interested in Intel’s manufacturing business.
Arm shares fell 1.4% in premarket trading on Friday, while Intel fell 0.8%.
Intel is split into two main divisions: a product group that develops chips for PCs, servers and networking equipment, and a second division that manages its factories.
Intel, once the world’s largest chipmaker, has faced takeover speculation after a sharp decline in business performance this year.
The company recently reported disappointing earnings, resulting in the sharpest share price decline in decades.
Along with cutting 15,000 jobs to reduce costs, scaling back factory expansion and suspending the long-standing dividend.
As part of its restructuring efforts, Intel is separating its chip products division from its manufacturing operations.
The move is intended to attract outside customers and investors, but also paves the way for a possible company split, according to a Bloomberg report last month.
Arm, majority owned by Japan’s SoftBank Group Corp. (TYO:), generates most of its revenue from licensing chip designs for smartphones.
However, CEO Rene Haas has been working to expand Arm’s presence beyond that market, especially in the PC and server sector, where it competes directly with Intel.
Although Intel has lost some of its technological edge, it still dominates these markets.
A potential partnership with Intel would expand Arm’s market reach and drive its move toward selling more complete products.
Currently, Arm licenses its designs to other companies, who then build the final components. Arm’s customers include major technology companies such as Amazon (NASDAQ:), Qualcomm (NASDAQ:) and Samsung (KS:).
Under Haas’ leadership, Arm has shifted to offering more fully developed products, which could put it in competition with its current licensees.
Despite its smaller size, Arm’s market value soared after last year’s IPO, to more than $156 billion.
Investors view the company as a major player in the growing AI market, especially as it increases its focus on data center chips. With an 88% stake owned by SoftBank, Arm also has significant financial backing, the report said.
In contrast, Intel has seen its market capitalization fall by more than half this year and now stands at $102.3 billion. Yet Intel has other options.
Apollo Global Management (NYSE:) Inc. recently offered to invest up to $5 billion in the company, showing support for CEO Pat Gelsinger, the report said.
In addition, Intel plans to sell part of its stake in Altera Corp., a semiconductor company it bought in 2015, to private equity investors.
Intel separated Altera from its operations last year with plans to take it public. Recent speculation about a Qualcomm takeover has also provided a boost to Intel’s stock price, the report said.
