The dominant theme in this set of predictions for 2012 is the mobile conversion as we abandon our desktops for mobile devices and the Cloud. Intel, while the dominant maker of microprocessors, doesn’t have a strong product position in mobile. Worse still, the company has a leadership vacuum and a culture that has not adapted well to change. Deep pockets aren’t enough when you don’t know where to spend the money and you are running out of time. That’s Intel.
The company is desperate. It needs a mobile product line that doesn’t exist and there isn’t enough time left to develop one internally. For Intel the build or buy decision has already been made (buy, buy, buy) though I doubt that at this moment much of the company fully even knows that. But shortly they will.
The only obvious purchase for Intel to make is San Diego-based Qualcomm, which would instantly give Intel a solid mobile product line, deep technology and mobile IP holdings, and a dominant position in a market where Intel is currently struggling. Other mobile technology companies are possible acquisitions, like Marvell, but Qualcomm is the only sure win and Intel can’t afford to do less than win.
But Qualcomm will be expensive, with a current market cap of $92 billion — ninety-two billion!!! — compared to $124 billion for Intel, itself. This will be the most expensive acquisition in Intel history and — given that Intel will have to offer Qualcomm a $10+ billion premium — will be more a merger of equals.
And as a merger of equals, here’s how the deal will go down. Intel CEO Paul Otellini will become chairman, relinquishing his Intel CEO position to Paul Jacobs, Qualcomm’s current CEO and son of co-founder Irwin Jacobs who is about to retire from the Qualcomm board.
This is all good. Both are fine companies and the combination will make them stronger. I think it will receive regulatory approval. Jacobs and Qualcomm will bring a tectonic shift to Intel that the larger company needs. Otellini, who has been without a graceful exit, will finally have one.
Cynics may say this merger devalues the vaunted Intel Architecture but I would argue at this point that IA is not only without value, it actually comes at a cost because it has to be maintained. Intel needs a revolution, Qualcomm needs a next stage of growth and a captive fab to bring it greater economies of scale.
Now where do they put the headquarters?