No. 1 chipmaker Intel's (INTC) $16.7 billion Altera acquisition is "unexciting" and won't scoop Xilinx (XLNX) customers, M Science analyst Mark Bachman said Friday, three weeks after Xilinx forecast sub-10% long-term growth in the programmable-chip market.
Intel isn't employing its 14-nanometer process to compete with Xilinx's 16-nm process for field-programmable gate array (FPGA) sales, a key synergy to undercutting Xilinx, Bachman wrote in a research report.
"The typical FPGA customer is looking for a part that has significantly longer deployment than most integrated circuits," he wrote. "As such, many FPGA customers prefer stability in their hardware providers -- this makes Altera's acquisition unexciting to some clients."
Intel's programmable-chip group will likely lose customers until it launches new solutions, such as integrated FPGAs and CPUs (central processing units) with high-level language optimization, Bachman wrote.
Intel shares rose 0.3% on the stock market today, helped by reports that it would a contract to supply modem chips to Apple (AAPL) for the next iPhone.
Xilinx dipped 0.6%.
For fiscal Q2, Bachman expects Intel to report $13.51 billion in sales vs. the consensus of 44 analysts polled by Thomson Reuters for $13.53 billion. Bachman sees a sequential decline in PC sales to $7.21 billion, below broader views for $7.31 billion.
Although he expects an uptick in data center and programmable solutions (Altera) sales, Bachman's model for $4.05 billion and $406 million, respectively, is below the consensus for $4.17 billion and $416 million.
Bachman's consensus-lagging model follows Xilinx's late-May analyst day. Then, the programmable chipmaker said it expects $750 million in incremental opportunity through 2021. But that only represents a 6% compound annual growth rate.
FPGAs aren't part of Intel's massive restructuring, announced in April, when the company reported fiscal Q1 sales that lagged expectations on tiny growth in the PC unit. Industry tracker IDC expects PC sales to slump 7.3% in 2016.
Intel is stepping away from PCs to focus on high-growth segments such as data center, Internet of Things and memory. The company plans to cut 12,000 jobs and save $750 million to reinvest in those key growth areas.
The data center is Intel's most important unit, Bachman says. But $4 billion in fiscal Q1 data center sales fell 7% sequentially and 9% vs. the year-earlier quarter. For fiscal Q2, Bachman's model would be a slight 1% uptick. But organic growth is going to be tricky.
"Intel's monopoly in the segment gives it few options for inorganic growth," he wrote. "Expansion of the mobile sector is, ironically, the most promising growth catalyst for Intel's data center group."
Mobile was Intel's money pit last year. Now, Intel is working to shed $800 million in mobile losses. In April, CEO Brian Krzanich said the company is "absolutely on schedule" in cutting its mobile losses.
