Should Intel Buy Nvidia?
Should Intel buy Nvidia? It’s just a thought but could it be a good strategy? If Intel (NASDAQ:INTC) picked up Nvidia it could significantly strengthen its position in a rapidly changing market and virtually crush AMD (NYSE:AMD). Let’s think about it for a moment. What would Intel gain by buying Nvidia?
It is clear that Nvidia is having success in the mobile market with its Tegra processors whereas Intel has yet to show that it can make an impact in this market. We wrote Nvidia’s success with Tegra in a note titled Nvidia Can Hit $20 if Tegra Takes Off. A shift to tablets and the increasing use of smartphones are putting the business of traditional personal computers in jeopardy, which is Intel’s core market. As such, Nvidia’s acquisition could give its bigger peer a much needed push in the mobile space.
In addition to this, Intel could leverage Nvidia’s GPU technology to improve its Sandy Bridge hybrid processors that might face some competition from AMD’s Llano. While this would help keep AMD at bay, it would also prevent Nvidia from pestering Intel with added competition in the high performance computing and server market in the future – which Nvidia is focused on.
Does Intel have capacity to do it?
We note than Intel has about $7.5 billion in cash whereas Nvidia’s current market value stands close to $7.3 billion. If Intel geared up for such as deal, it would likely be financed with some debt which Intel’s balance sheet could certainly manage.
Our price estimate for Intel stands at $27.75 implies a premium of about 30% to the market price.