Intel in talks to buy Altera

[liahos1]

http://www.wsj.com/articles/intel-in-talks-to-buy-altera-1427485172

Intel Corp. is in talks to buy Altera Corp. in a deal that would be the chip-making giant’s largest takeover ever.

Terms of the potential deal and its timing couldn't be learned, and it is possible there ultimately won’t be one.

With a market capitalization of $10.4 billion before the news Friday, Altera would be a big bite for Intel, which has traditionally stuck to smaller acquisitions whenever it has done deals.

Intel is a giant in the chip industry, with a market capitalization of about $140 billion, but weakening demand for personal computers has hurt its earnings. This month, the Santa Clara, Calif., company cut its revenue outlook for the first quarter by nearly $1 billion to roughly $12.8 billion.

Altera, based in San Jose, Calif., designs processors used in phone networks, cars and other products.

Intel, which supplies most of the chips that serve as calculating engines in PCs and server systems, began suffering several years ago as consumer spending shifted from laptop computers to tablets and smartphones. Rival chip designs have been used in many of those products.

Intel and Altera have a history of cooperation. In 2013, Altera announced that it would begin using Intel technology in its chip designs. As part of a 12-year agreement between the companies, Intel agreed that Altera would be the only major programmable-chip maker for which it would help build products.

Acquisition activity among such companies has picked up of late. Just this month, NXP Semiconductors NV agreed to buy Freescale Semiconductor Ltd. for $11.8 billion.

Intel’s last big acquisition was in 2011 when it closed on a $7.7 billion deal to buy security-software company McAfee Inc.

Intel stock, which had risen 18% in the past year, rose 8.3% to $32.58 following The Wall Street Journal’s report of the potential acquisition. Altera stock, down 2.5% in the past 12 months, jumped 28% to $44.40.

 

[crashtech]

I had a tip about Altera many months ago and never did anything about it. Guess that's why I have to work for a living.

 

[ShintaiDK]

Funny enough Intel already fab their chips. I wonder if their CFO had a good look on the production cost, R&D and margins and just said...more cake!

 

[liahos1]

Funny enough Intel already fab their chips. I wonder if their CFO had a good look on the production cost, R&D and margins and just said...more cake!

makes sense given there could be a big place for fpga in certain cloud/data center workloads

http://research.microsoft.com/pubs/212001/Catapult_ISCA_2014.pdf

 

[witeken]

Funny enough Intel already fab their chips.

They also announced this CPU + FPGA server chip last year.

 

[Phynaz]

Guess Intel had to do something with the $14B of cash it's sitting on. And 250M shares of stock it has in the vault.

 

[jpiniero]

Funny enough Intel already fab their chips.

There was some talk about Altera defecting a couple months ago. Obviously buying them ends that.

 

[NTMBK]

Well that's one way to guarantee customers for your foundry, buy them...

 

[Idontcare]

I had a tip about Altera many months ago and never did anything about it. Guess that's why I have to work for a living.

Ah the tricky moral morass that is insider trading

On the topic though, at first impression this is kind of a strange M&A in my opinion.

The arguments to be made for the M&A now are no different (an no more compelling) than the argument to be made for this same M&A were you to have proposed it a decade ago.

So why now? What's changed that isn't known to the markets already? Just doesn't quite all make sense to me at the moment.

 

[Burpo]

AMD - Samsung deal maybe? Probably both been in the works awhile.. Everyone's posturing..

 

[soccerballtux]

misread title as 'Africa' and was confused

 

[soccerballtux]

Ah the tricky moral morass that is insider trading

On the topic though, at first impression this is kind of a strange M&A in my opinion.

The arguments to be made for the M&A now are no different (an no more compelling) than the argument to be made for this same M&A were you to have proposed it a decade ago.

So why now? What's changed that isn't known to the markets already? Just doesn't quite all make sense to me at the moment.

synergies never do to your types

I do apologize for using the word

 

[Idontcare]

synergies never do to your types

I do apologize for using the word

My "types"?

What exactly do you think you are communicating with your choice of words in that post?

Ford could have created a lot of synergy by buying Firestone, simply throwing the word out there doesn't make or create the business case for doing so.

 

[Nothingness]

Funny enough Intel already fab their chips. I wonder if their CFO had a good look on the production cost, R&D and margins and just said...more cake!

Intel fab only the higher end of Altera chips. I wonder if one can already buy these high end 14nm chips BTW.

 

[podspi]

There are a lot of really cool stuff I am imagining you can do with the Altera tech. This allows for reconfigurable tech (to an extent), right? Would it, in theory, be possible to say have it act as an IGPU (or IGPU extension) one moment, then say fixed-hardware encoder/decoder, etc the next?

I'm imagining a situation where we get a generic, reconfigurable accelerator that can be repurposed depending on what you are doing. How reasonable is that, or does the nature of the chip pretty much destroy perf/watt?

 

[Arachnotronic]

Intel fab only the higher end of Altera chips. I wonder if one can already buy these high end 14nm chips BTW.

I don't think so. I'm not sure if the design has even taped out and begun sampling yet.

 

[witeken]

I don't think so. I'm not sure if the design has even taped out and begun sampling yet.

Intel said they would be about on par with TSMC or so.

 

[Arachnotronic]

There are a lot of really cool stuff I am imagining you can do with the Altera tech. This allows for reconfigurable tech (to an extent), right? Would it, in theory, be possible to say have it act as an IGPU (or IGPU extension) one moment, then say fixed-hardware encoder/decoder, etc the next?

I'm imagining a situation where we get a generic, reconfigurable accelerator that can be repurposed depending on what you are doing. How reasonable is that, or does the nature of the chip pretty much destroy perf/watt?

I'd say the bigger concern is perf/$ penalties

 

[soccerballtux]

My "types"?

What exactly do you think you are communicating with your choice of words in that post?

Ford could have created a lot of synergy by buying Firestone, simply throwing the word out there doesn't make or create the business case for doing so.

well, in my book it's an engineering swear word

 

[cytg111]

Ah the tricky moral morass that is insider trading
.

If by moral morass you mean the equation, risc of getting caught / payoff = is it worth it?
If you are thinking with ethics, morals or 'feelings' in that game then you allready lost it.

 

[cytg111]

well, in my book it's an engineering swear word

- what ?

 

[NTMBK]

The arguments to be made for the M&A now are no different (an no more compelling) than the argument to be made for this same M&A were you to have proposed it a decade ago.

So why now? What's changed that isn't known to the markets already? Just doesn't quite all make sense to me at the moment.

Intel always needs to grow their volume to fill their fabs. It's the basis of their business model, and never changes. 10 years ago the PC market was still booming, and Intel still had large swathes of the server market left to grab. Now the PC market is moribund, and Intel has conquered the majority of the high-volume portions of the server market. There is high growth in the mobile market which Intel is trying to capture, and if they are successful in that then it should do the trick, but going after FPGAs will help as a Plan B. (Same for Internet of Things.)

 

[Ajay]

So why now? What's changed that isn't known to the markets already? Just doesn't quite all make sense to me at the moment.

Yeah, exactly - why buy the cow when you are getting the milk for free?! As you said, there is something that we, the public, don't know about this deal IMHO.

This could be a play to speed x86 into the auto and IoT space - that's the only angle I can come up with.

 

[dealcorn]

FPGAs are increasingly recognized as very helpful in select niches within the Data Center. They tend to be high margin products because they bring value to customers by reducing the costs to process a target workload. Intel has a reasonable share of the Data Center market and has previously spoken of it's desire to expand into adjacent markets. The synergy of using a shared sales forces for marketing results in cost savings as does the the reduction of duplicated administrative costs. Customer's preference for a single source of supply that insures that "stuff" works well together may aid in marketing efforts. Intel has some semiconductor design experience that may be helpful with FPGAs. Finally, by bringing FPGAs in house, Intel has guaranteed supply and competitor actions will never deny Intel's access to this resource. On it's face, the possible acquisition appears straightforward and forward looking.

 

[Idontcare]

well, in my book it's an engineering swear word

I wouldn't say synergy is an engineering swear word, efficiency of scale is a well appreciated and leveraged concept in engineering.

However, synergy is most definitely a feared word for anyone who values their job and desires some degree of job security.

That aside, Altera and Intel product offerings are so orthogonal to one another (the very requirement for Intel to even let them fab their chips at Intel in the first place) that it seems any synergy to be found by a merger will be within the rounding error of the significant digits.

What I am looking to understand is the growth picture that is implied in any investment effort on Intel's behalf. Does Altera really have a >60% GM trajectory with 8-10 years sustained business opportunities?

If they don't, then I just don't see Intel's decision makers convincing the BoD to greenlight such a large acquisition. It doesn't scream "strategic" nor "high GM, high revenue growth" to me.

But I am prepared to be corrected, which is why I continue to look at it offline as well.

If by moral morass you mean the equation, risc of getting caught / payoff = is it worth it?
If you are thinking with ethics, morals or 'feelings' in that game then you allready lost it.

Yes, the risk equation. If you knew me IRL then you'd know I'm not the sort of person who would last 30 minutes in a federal pound-me-in-the-bodycavity prison. For me, no reward is worth that risk.