Intel eyes Altera as chip deals accelerate
Intel is close to clinching a takeover of fellow chip maker Altera for more than $US15 billion, the latest sign of consolidation in the semiconductor industry.
Intel is expected to pay about $US54 a share for Altera, whose specialized chip designs would help Intel expand beyond chips for personal computers, according to a person briefed on the matter.
An agreement could be announced as early next week, though this person cautioned that talks are continuing and might still collapse.
Attendees visit the Intel exhibition stage during the 2015 International Consumer Electronics Show Asia in Shanghai, May 25, 2015. Reuters
The two sides had been in talks earlier this year, though the discussions were eventually put on hold when Altera rejected an offer in the ballpark of $US54 a share, people briefed on the talks said previously.
But after the talks ended, Altera reported quarterly earnings that fell below expectations. Meanwhile, one investor, TIG Advisors, began to publicly campaign for a resumption of talks with Intel.
If completed, a takeover would be the latest among chip makers as companies seek larger scale and more diversified offerings. Growing and having more products can give those manufacturers greater savings and negotiating leverage with customers.
On Thursday, Avago Technologies struck a roughly $US37 billion acquisition of Broadcom to break into the top tier of semiconductor companies.
Intel and Altera both make semiconductors, but vastly different types. Intel is known primarily for the standard chips that go into personal computers and computer servers. They consist of millions of transistors, and once created, their performance can be changed only slightly by changing the software that works with them.
Altera's chips - known as field programmable gate arrays, or FPGAs - are lower in power and performance but can be altered after manufacturing to carry out different functions. That gives them far greater flexibility.
Intel may be seeking Altera to create computers that combine the power of a standard semiconductor with the flexibility of an FPGA, by means of a board with both types of chip. This could potentially give Intel the ability to build, for example, a computer server that can add functions so it lasts longer inside a corporate data center.
This move would reflect several recent trends in the industry. Giant cloud computing centers have become an increasingly large part of Intel's business, made even more significant as smartphones have lowered the demand for "Intel Inside" personal computers.
Intel now has dedicated sales teams working with big chip consumers, like Amazon.com, that tell the company its specific computing needs for its giant cloud systems. In addition, Intel is now concentrating on at least 200 companies that are building significant computing clouds. Adding FPGAs might be a good way to help companies customize those data centers.
Shares in Altera rose 4 per cent on Friday, to $US48.85, after The New York Post reported that an agreement between the two companies appeared near. Shares in Intel were up 1.3 per cent, at $US34.46.
A spokesman for Intel declined to comment, while a representative for Altera was not immediately available for comment.
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