Is Qualcomm buying Intel? “Almost too dumb to comment,” says Citi By Investing.com

A report from The Wall Street Journal claimed last week that Qualcomm (NASDAQ: ) had approached Intel (NASDAQ: ) about a potential takeover, but Citi analysts dismissed the idea as “almost too dumb to comment on.” .

According to Citi, such a move would be detrimental to Intel shareholders, citing Qualcomm’s lack of experience in operating factories and its historically high operating expenses.

Analysts say Intel should instead focus on exiting the foundry business, a move they believe is in the best interests of shareholders.

The foundry business, which Citi estimates lost $2.8 billion last quarter and is expected to lose around $8 billion annually, has little chance of becoming a profitable operation, according to the investment bank.

They believe that exiting this sector could boost Intel’s earnings per share (EPS) to between $3.00 and $4.00, while lifting gross margins into the low-to-mid 50% range.

While Citi acknowledges that Intel should spin off its foundry division, the firm recommends that Intel keep its processor manufacturing operations.

“We believe that Intel should maintain its processor manufacturing business given the synergies with processor design, and we do not believe that Intel should become bullish because Intel should catch up with TSMC in 2025,” the bank writes.

Citi reiterated its neutral rating on Intel, with Intel’s price target set at $25.

“We expect Intel’s EPS to be under pressure given its foundry business, which we believe has minimal chance of succeeding,” Citi concluded.