ARM (ARMH) Counteroffers from Apple (AAPL) or Qualcomm (QCOM) 'Unlikely', Credit Suisse Says; Apple Could Target Imagination Technologies

Credit Suisse analyst Kulbinder Garcha weighed in on possible counteroffers for ARM Holdings (NASDAQ: ARMH) after the company agreed to be acquired by Softbank for more than $32 billion.

Garcha said it is unlikely that Apple (NASDAQ: AAPL) would make a counteroffer, but said a response is possible. "We believe it unlikely that Apple will make a counteroffer for ARM as we believe many anticompetitive issues may arise," he said. "While Apple does have significant offshore cash and is reliant on the ARM-based architecture for their processors, how Apple would potentially deal with the other ARM licensees would raise anticompetitive concerns. We do believe a competitive response is likely, and see Imagination Technologies as a likely candidate as it is the sole IP supplier for graphics in iPhones/iPads (see: IMG: More M&A debate, sidelines underlying issues)." The firm maintained an Outperform rating and price target of $150 on AAPL.

On Qualcomm (NASDAQ: QCOM_, the analyst said tge counteroffer logistics are complicated. "A counteroffer from Qualcomm also seems unlikely in our view given the logistical challenges needed to complete the counteroffer and transaction," he said. "We believe that in order to make the counteroffer, Qualcomm would first split its QCT and QTL business, which is unlikely given the decision at the beginning of the year to remain one entity. Further complicating this is the timing of the deal, which only gives 3 months for a counteroffer. In other words, Qualcomm would have to both split and make a counteroffer within 3 months, which we believe would be a tremendously difficult task."

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Shares of Apple closed at $98.78 yesterday.

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