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There are some obvious ways the two companies fit -- but is Altera worth what Intel would have to pay -- likely more than $10 billion?
(The Oregonian)
Intel appears to be contemplating the biggest acquisition in its history, a takeover of programmable chip company Altera Corp. that would likely run more than $10 billion.
Shares in both Intel and Altera soared Friday when The Wall Street Journal broke the news, suggesting investors see a lot to like in the deal. Altera climbed 28 percent, while Intel rose more than 6 percent (Altera gave back back some of those gains Monday morning, falling 4.7 percent - its market cap currently stands at $12.7 billion).
Altera makes field programmable gate arrays (FPGAs), versatile chips that can be tailored to perform specialized functions in everything from digital cameras to server farms.
Portland-based Lattice Semiconductor also makes FPGAs, but it has scaled down its business to focus on a middle tier of the market, less vulnerable to competition from Altera and rival Xilinx, which are much bigger than the Oregon company.
Neither Intel nor Altera are commenting on a potential deal, and the WSJ said it's possible nothing will come of the talks, but there are some obvious reasons why Intel might be interested:
- Data centers are Intel's most profitable business, growing 15 percent annually, and Altera's FPGAs play an increasingly important role in improving performance inside server farms.
- With
Investment and technology analysts spent the weekend mulling the potential combination. Here's a sampling of the sentiment:
- IHS analysts Tom Hackenberg and Robbie Galoso wrote Monday that a deal would improve Intel's position in telecommunications - a market where Intel is historically weak - as well as industrial technologies and the emerging Internet of Things. "Whether it is offering complementary solutions, or combining intellectual property, in order to create new unique" systems on a chip (SoCs), Hackenberg wrote, "the combined potential of Intel and Altera should be well poised to target a growing telecommunications market and IoT applications."
- Noted Intel bear Stacy Rasgon of Sanford C. Bernstein & Co. said Intel has drawn down its cash reserves, meaning it would likely borrow to finance a deal - or dilute existing shareholders by issuing more stock. The deal does make some strategic sense in the data center market, Rasgon wrote, but he said a deal would "be defensive in nature, moving to not just enhance the company's datacenter business but, in fact, to protect it." At current prices, Rasgon said Intel would be overpaying for Altera.
- In Portland, Pacific Crest Securities' Mike McConnell wrote to clients that he sees "Altera as a strategic and synergistic fit for Intel." A deal would diversify Intel away from its PC business and enable the company to expand its contract manufacturing business.
-- Mike Rogoway
mrogoway@oregonian.com
503-294-7699
@rogoway