WSJ What’s News - Intel Has Never Been Cheaper. But Is It a Good Deal?

Episode Date: September 24, 2024

P.M. Edition for Sept. 24. Heard of the Street columnist Dan Gallagher discusses Intel’s many challenges as it becomes a takeover target. And the U.S. Justice Department sued Visa, alleging it violated antitrust laws. Plus, The Wall Street Journal’s Georgia Wells on why Telegram has started cooperating with law enforcement. Tracie Hunte hosts.  Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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But is it? The reality is Intel is kind of two businesses and both businesses are really struggling right now. Plus, how Telegram is changing its tune with law enforcement. It's Tuesday, September 24th. I'm Tracy Hunt for The Wall Street Journal. This is a PM edition of What's News, the top headlines and business stories that move the world today.

Caroline Ellison, the star witness and FTX founder, Sam Bankman Freed's criminal trial was sentenced to two years today in prison for her role in what prosecutors called one of the largest financial frauds in US history. She had pleaded guilty in late 2022 to seven fraud and money laundering offenses related to the crypto exchanges collapse. Her testimony helped put her former boyfriend and boss in prison for 25 years. She had hoped her cooperation with federal prosecutors would have allowed her to avoid jail time. U.S. Judge Louis Kaplan praised her cooperation and sincere remorse for her crimes, but said

he couldn't provide a quote, get out of jail free card and needed to deter others from committing financial fraud. The U.S. Justice Department sued Visa Today for anti-trrust violations, accusing the company of using illegal tactics to maintain a monopoly in debit card payments since 2012. The lawsuit says Visa used carrots and sticks to keep potential competitors off its turf and to punish merchants that did business with rivals. A lawyer for Visa said the company is just one of many competitors and called the lawsuit meritless. Visa, which operates the largest card network in the US, sits at

the center of many consumers' daily payments by providing the infrastructure that debit and credit card payments run on. The case comes as consumers move further away from cash in favor of card payments. US stocks climbed to new records today after China's central bank unveiled a raft of measures to support the country's weakening economy. The S&P 500 added 0.3%, closing at a record high for the 41st time this year. The Dow ticked up 0.2% or roughly 84 points, also hitting a record, while the Nasdaq Composite advanced 0.6%. For years, police have complained that Telegram would ignore their request for help in tracking

down suspected criminals using the platform. But now the messaging and social media app is cooperating, following the arrest last month of Telegram founder Pavel Dorov. He's being held in France on charges of complicity in distributing child pornography, illegal drugs, and hacking software on the app. All charges he denies. French prosecutors say the company is now regularly turning over details of users suspected of illegal activity. Joining us now to discuss why Telegram is changing its tune is journal reporter Georgia Wells.

So, Georgia, this seems like a big shift for Telegram. How significant is it? Georgia Wells Yeah, this is a huge 180 for Telegram because for years Telegram's stance was we don't process requests related to content on our platform and now, obviously, they very much are. It was actually even Telegram's own users who had warned Dorov about the need for a less freewheeling kind of system.

In late 2021, more than two dozen organizations wrote a letter to him, and they were asking him to implement transparent content rules and policies. They also wanted him to develop ways for people to communicate with his company and kind of like an appeals process for frustrated parties. And they say that Durov didn't respond and it's really unusual to see apps own users kind of calling for more rule of law on the platforms. So how are they cooperating now? So ever since Durev was arrested,

Telegram has been regularly turning over phone numbers and other information to French authorities about users suspected of illegal activity. Telegram also updated its terms of service and privacy policy to make clear that, quote, the IP addresses and phone numbers of those who violate our rules can be disclosed to relevant authorities in response to valid legal requests. That's complete night and day from before Derov was arrested.

Is this part of a deal between Derov and French authorities? No. So our understanding is that there has not been a formal agreement with Telegram and French authorities or any deal to continue to cooperate, though French law could permit a plea bargain. Lyleen Orr Giorgia Wells is a technology reporter for The Wall Street Journal. Thank you, Giorgia. Giorgia Wells Thank you for having me. Lyleen Orr Coming up, can a takeover save Intel? That's

after the break. a pet groomer, a contractor, or a consultant. You can get customized coverage for your business. Contact a licensed TD insurance advisor to learn more. As we exclusively reported last week, Qualcomm has made a takeover approach to Intel. Intel was once the world's most dominant designer and producer of advanced semiconductors. But now, according to FactSet, the company is cheaper than its book value, which is mainly factories and intellectual property, minus net borrowings. Intel has never been this cheap, but that doesn't mean it's a good deal.

Joining us now to discuss this is the Wall Street Journal's Dan Gallagher. So Dan, why would Intel not be as good of a deal as it may sound? The reason it looks that way is because, like you mentioned, the market's essentially valuing Intel the company for less than the assets on its balance sheet. So it's incredibly cheap. The reality is Intel's kind of two businesses and both businesses are really struggling right now. One of them is a manufacturing business, it's making chips.

Most of that business comes from Intel's internal needs. So they don't really have many customers yet, so it's losing billions of dollars a quarter. And then you go to the other side of the business, which is essentially a chip design where they design chips that are used in PCs, used in servers and data centers. A lot of the spending in servers and data centers is going away from those kind of chips towards the stuff Nvidia makes. And so that business was much bigger for Intel about three, four years ago.

It's shrunk significantly to the point that like some quarters, it's barely made any profits and that used to be their most profitable business. It's also very hard to kind of break those businesses apart. So it would be a very problematic acquisition for anybody and for Qualcomm. There might also be some regulatory hurdles for any kind of possible merger. There would be huge regulatory hurdles. On this side in the US, the United States has given Intel a lot of money specifically

to build up more chip fabs in the US as essentially a strategic decision. So somebody coming in to take that over has to deal with that complexity. Would the US government allow that to happen? Who would that buyer be? And then you add the added wrinkle that Intel has factories in China. And so Chinese authorities would also have to say yes to any kind of merger deal.

Chinese authorities right now don't really want to help US companies. And that problem has stood in the way of some past tech mergers, including one that Intel tried to do. So the odds that China would say yes to something like this are very low. So what's next for Intel? Is an acquisition the only way out of its current troubles?

I don't think so. There's probably a lot of options on the table for them that would be easier to do than a full-on acquisition, let's say. More likely is they're going to find more partners to kind of help with financing, take equity stakes in the future of the business rather than have somebody buy them out completely. Dan Gallagher is a columnist for the Wall Street Journal's Heard on the Street. Tech giants swore just a few years ago that they would slash their carbon emissions. But the scramble to build artificial intelligence data centers that require massive amounts

of energy is upending the industry's climate pledges. The demand is setting back U.S. climate progress and optimism, but it's also pushing the tech industry to work with power producers in an effort to speed development of new clean energy sources. WSJ renewable energy reporter Jennifer Hiller spoke to our tech news briefing podcast about big tech's efforts to find clean power that's available 24 seven.

What we are seeing is that some of the companies are trying to come up with ways to get new technologies onto the grid. So they are doing things like backing geothermal startups. They're working with utilities in different states to try to come up with maybe new rate structures where they would pay essentially a higher rate that would help underpin some of the investment needed

in something like long duration battery storage. And then we're also seeing deals like the one announced last week between Microsoft and Constellation. Constellation Energy owns a large number of nuclear reactors across the country, including Three Mile Island, the undamaged reactor from Three Mile Island. And it closed down in 2019. And now there's a power purchase agreement between Microsoft and Constellation that's gonna cover the cost essentially

of bringing that reactor back online. That's the kind of thing that just wouldn't have been imaginable a handful of years ago. And you can hear more about that in today's tech news briefing podcast. Americans are having fewer babies, and it's becoming an issue for politicians and policymakers. What questions do you have about America's falling birthrate and what it means for politics and the economy? Send a voice memo to wnpod at wsj.com or leave a voicemail with your name and

location at 212-416-4328. We might use it on the show. And that's What's the News for this Tuesday afternoon. Today's show was produced by Pierre Bienneme and Anthony Bansi with supervising producer Michael Kosmitis. I'm Tracy Hunt for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.