Why Intel Stock Wasn't Lighting a Fire Under Investors on Friday

Some investors probably saw a missed opportunity with the latest news about Intel (NASDAQ: INTC) on Friday. A media report claimed that the company rebuffed a buyout offer of one of its less popular business units. As a result, an ambivalent market traded the chip maker's stock sideways. It ended up closing flat on the day, marking an only slightly better trading session than the marginally declining S&P 500 index.

Major division not for sale, apparently

Bloomberg reported after market close on Thursday that Intel's U.K.-based peer Arm Holdings (NASDAQ: ARM) approached the American chip giant about acquiring its product division. Citing an unnamed "person with direct knowledge of the matter," the financial news agency said the effort was rebuffed, with Intel saying the business was not for sale.

A divestment of the product division would have fundamentally changed Intel. It's one of the company's two main divisions, with the other being its Intel Foundry Services (IFS) manufacturing arm. Early this year, Intel divided its operations in this way as part of a broader restructuring effort. There has been speculation that the chip maker, which has fallen on challenging times, is preparing to split into two separate companies.

It was unclear how much Arm Holdings might have been willing to pay for the product division. Neither it nor Intel has yet commented on the Bloomberg report.

A glass half-empty or half-full situation?

The flat trajectory of Intel stock in the wake of the news indicates a difference of investor opinion about such a sale. On the one hand, it would provide the company with a pile of capital to plow into its foundry ambitions; on the other, it would entirely eliminate a core part of its business. Management will now be under increased pressure to improve the product division's performance.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.