Common wisdom would have it that Apple buying Intel would send Intel customers like Dell Inc. (NASDAQ:DELL) and HP running for the hills and into the arms of Advanced Micro Devices, Inc. (NYSE:AMD). The problem is that Advanced Micro Devices, Inc. (NYSE:AMD) is less relevant today and Global Foundries’ manufacturing technology lags too far behind so there would likely be little choice. The reality for Intel is that the PC market is going away anyway and teaming up with Apple does not change the PC market’s ultimate fate, only consumers decide that. Kind of like a terminally ill patient taking up smoking, it doesn’t matter in the long run. Production demands to supply Apple products would far outstrip any loss of business from former PC customers. The capacity that TSMC would have had to add to service Apple would instead be added to Intel’s stable of fabs thus increasing total value.
There is much improved upside for Intel shareholders as the potential today is hoping for a slower slide into oblivion (unless a miracle occurs). Apple Inc. (NASDAQ:AAPL)’s stock is not that expensive either having seen a long decline while searching for a catalyst not unlike Intel’s position. Apple shareholders could see a real use for all that cash and an acquisition that could “move the needle” and send shock waves through the tech space. Intel’s current valuation is relatively low as compared to the value it could add to Apple Inc. (NASDAQ:AAPL). While pundits can say that big mergers never work we can already see that Samsung has been quite successful as a combined consumer electronics and semiconductor manufacturing behemoth. Samsung’s success has not come from being at the bleeding edge of innovation, but being a very fast and smart follower. The way that the US and Silicon Valley stay in the game and ahead of the game is to get together a bigger and badder behemoth.
At the end of the day the combination of innovative products and world leading semiconductor technology would leave Samsung behind in second place whereas today it is a horse race for global domination of the smart phone/tablet space with the near-term momentum in Samsung’s favor. The value of a combined entity is clear and is mutually beneficial to both sets of shareholders. With such a move, Tim Cook would cement his legacy out from under the shadows of Steve Jobs and the US could slow the flow of technology to overseas competitors.
The article Would This Bold Move Solidify Apple’s Position? originally appeared on Fool.com and is written by robert maire.
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