[Bloomberg] Intel Issues $7 Billion in Bonds to Help Fund Takeover of Altera

[NTMBK]

Intel Corp. tapped the bond market for $7 billion to finance part of its $16.7 billion takeover of Altera Corp. at lower rates than initially offered to investors.

http://www.bloomberg.com/news/artic...-sale-backing-16-7-billion-takeover-of-altera

That's a big chunk of debt.

 

[Idontcare]

At ~$0.5B/year net profit, it will only take a mere decade or two for this deal to break-even for Intel's shareholders.

http://finance.yahoo.com/q/is?s=ALTR&annual

 

[gorion]

At ~$0.5B/year net profit, it will only take a mere decade or two for this deal to break-even for Intel's shareholders.

http://finance.yahoo.com/q/is?s=ALTR&annual

Assuming constant profits.
That doesn't always turn to be true

 

[DrMrLordX]

Doesn't Intel have enough in cash holdings to make the payment without a bond issue?

 

[sm625]

In 2012, intel issued $6 billion in bonds jsut to use to buy back stock. In 2011, it issued $5 billion. Chump change. They spend more on buying back their own stock than on R&D.

 

[Arachnotronic]

At ~$0.5B/year net profit, it will only take a mere decade or two for this deal to break-even for Intel's shareholders.

http://finance.yahoo.com/q/is?s=ALTR&annual

Yes, but if Intel can successfully integrate ALTR FPGA IP into Xeons and raise average selling prices of cloud-bound Xeon processors because of the added FPGA value, then the acquisition could pay off far quicker than that (assuming that there is robust demand for such parts).

We'll see if they do a good job integrating this acquisition or not over the next five years or so.

 

[ikachu]

Doesn't Intel have enough in cash holdings to make the payment without a bond issue?

Might as well borrow money now while rates are low.

Plus, companies can deduct the interest from their taxes. It's why Apple borrowed money for share buybacks:
http://qz.com/77639/why-is-apple-borrowing-money-to-pay-investors-when-it-has-more-cash-than-ever/

 

[dark zero]

They only have less than 5 years to show how fast they implement the technology. So... Intel might revamp again the industry it seems.

 

[dahorns]

They only have less than 5 years to show how fast they implement the technology. So... Intel might revamp again the industry it seems.

I'm fairly certain your posts are randomly generated words.

 

[dark zero]

I mean.. Intel has little time to show that the product of the fusion is worthy. They has a debt that they need to pay in that time.
Knowing how Intel has influence on the tech industry, they might revamp or change some aspects of that industry

 

[Phynaz]

Might as well borrow money now while rates are low.

Plus, companies can deduct the interest from their taxes. It's why Apple borrowed money for share buybacks:
http://qz.com/77639/why-is-apple-borrowing-money-to-pay-investors-when-it-has-more-cash-than-ever/

This. If the cost of the money is lower than the opportunity cost of spending the money elsewhere then you borrow the money.

In this case Intel feels using the cash they have on hand for something else will generate a greater return than it would to use the cash to purchase Altera.

 

[Fjodor2001]

Yes, that's the normal criteria. But there's also risk involved.

At todays lending rates there are plenty of companies with positive net result that one could consider buying. That's what it's like when the interest rate is close to zero or even negative in many countries. The net result of the company you buy barely has to be positive if all you consider is the short term opportunity cost.

But then there's the long term risk, if interest rates go up. Or if the company you bought no longer makes a positive net result after some time.

 

[Abwx]

In this case Intel feels using the cash they have on hand for something else will generate a greater return than it would to use the cash to purchase Altera.

It will increase the cost of acquisition one way or another..

That s just that using the money at hand would let them cashless, and factoring their still unpaid short term sales cost more than borrowing the equivalent through long term and fixed interest rates bunds...

 

[ShintaiDK]

2 things to remember.

FPGA is getting big in the cloud. And I am sure "Altera" marketshare will grow.

 

[PPB]

Intel pr slides about how intel is making the right decisions. One would think that people after a certain age would develop critic thinking and analysis. Well....

 

[ShintaiDK]

Intel pr slides about how intel is making the right decisions. One would think that people after a certain age would develop critic thinking and analysis. Well....

Xilinx writes the same, but they are also biased as a FPGA maker.

However Microsoft, Amazon, Google etc also says it.

Example:
http://www.eweek.com/cloud/microsoft-enlists-fpgas-to-catapult-cloud-data-center-performance.html
http://www.datacenterknowledge.com/...ustom-aws-cpu-for-fastest-ec2-instances-ever/

 

[jhu]

This. If the cost of the money is lower than the opportunity cost of spending the money elsewhere then you borrow the money.

In this case Intel feels using the cash they have on hand for something else will generate a greater return than it would to use the cash to purchase Altera.

I'll bet they have a bunch of money offshore, and it'd be cheaper to borrow money here than to bring outside money back into the country.

 

[Phynaz]

I agree