Intel in talks to buy smaller rival Altera in over $10-bn deal
28 March 2015
Intel Corp, the world's biggest chipmaker, is in talks to buy smaller rival chipmaker Altera Corp in an over $10 billion deal, The Wall Street Journal yesterday reported, citing people familiar with the matter.
The announcement comes at a time when Intel, the world's largest chip maker, which has maintained its dominance for chips used in PCs, has been slower than others to adapt to the rapidly growing popularity of smart devices gaining favour with users.
Altera, based in California, is one of the two largest makers of chips used in cellphone networks, data centres, computer-networking equipment, cars and defence systems. Its broad range of low-power programmable chips are used in small embedded devices and computer servers for big data centers
Accordingly, the deal with Altera would enable Intel to add to its range of chips for such devices and also strengthen its revenues from those sectors, with the acquisition of a rival that has used Intel technology earlier; in 2013, Altera said that that it would use Intel technology to make a of chip with wide-ranging applications from cloud computing to storage.
As a result of the deal between the two, Altera used its technology to make these chips in Intel's sophisticated plants till March last year
Reuters reported quoting a research note from Cowen & Co analyst Timothy Arcuri, "On the surface, Altera is one of the only semiconductor companies with better gross margins than Intel, and with about two-thirds of its revenue from telecom, wireless, military/aerospace, it definitely fits the bill of diversifying revenue beyond Intel's legacy computer markets," said .
Altera had a market capitalisation of about $10.4 billion before The Wall Street Journal first reported on the talk's yesterday morning, which surged to $13.4 billion at trading close.
The company has more than 12,000 customers worldwide, employs more than 3,000 people in over 20 countries and had revenues of $1.93 billion last year.
Intel is the worlds largest and highest valued semiconductor chip maker based on revenue.
Global M&A deals in semiconductors reached $ 31 billion in 2014.