Investing.com -- Arm Holdings Plc (NASDAQ:ARM) approached Intel Corp (NASDAQ:INTC). to explore the possibility of acquiring its struggling product division, but Intel responded that the unit was not up for sale, Bloomberg News reported on Friday, citing a source with direct knowledge of the matter.
The source, who requested anonymity due to the confidential nature of the discussions, said that Arm was not interested in Intel’s manufacturing operations.
Arm shares were down 1.4% in premarket Friday trading, while Intel slipped 0.8%.
Intel is split into two key divisions: a product group that develops chips for PCs, servers, and networking equipment, and a second division that manages its factories.
Once the world’s leading chipmaker, Intel has faced takeover speculation following a sharp decline in its business performance this year.
The company recently reported disappointing earnings, resulting in the steepest decline in its share price in decades.
Along with cutting 15,000 jobs to reduce costs, scaling back factory expansion, and suspending its long-standing dividend.
As part of its restructuring efforts, Intel is separating its chip product division from its manufacturing operations.
This move is designed to attract external customers and investors, but it also paves the way for a potential company split, according to a Bloomberg report from last month.
Arm, majority-owned by Japan's SoftBank Group Corp. (TYO:9984), 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, particularly in the PC and server sectors, where it competes directly with Intel.
Although Intel has lost some of its technological advantage, it still dominates these markets.
A potential partnership with Intel would expand Arm’s market reach and boost its move toward selling more complete products.
Currently, Arm licenses its designs to other companies, which then build the final components. Arm's clients include major technology companies like Amazon (NASDAQ:AMZN), Qualcomm (NASDAQ:QCOM), and Samsung (KS:005930).
Under Haas's leadership, Arm has been shifting toward offering more fully developed products, which could bring it into competition with its current licensees.
Despite its smaller size, Arm's market value has surged following its IPO last year, reaching over $156 billion.
Investors view the company as a key 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 considerable financial backing, the report said.
In contrast, Intel has seen its market capitalization fall by more than half this year, now standing at $102.3 billion. Still, Intel has other options.
Apollo Global Management (NYSE:APO) Inc. recently offered to invest up to $5 billion in the company, signaling support for CEO Pat Gelsinger, the report said.
Additionally, Intel is planning to sell part of its stake in Altera Corp., a semiconductor firm 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 acquisition has also provided a boost to Intel’s stock price, the report added.