Intel After Altera?


Altera (NASDAQ: ALTR) and Intel (NASDAQ: INTC) Back In Talks

Shares of Silicon Valley chip maker Altera (ALTR) Monday have finished the day up 5.6% to $56.87 on take over talk by Intel (NASDAQ: INTC) reported by the New York Post. The Merger is said to be to the tune of 13 billion dollars. Back in April, both Intel and Altera were in touch about a possible deal of this sort for $54 a share, but Altera unexpectedly did not accept the deal.  At the time, Altera was trading at $35 per share. Although the deal did not go through shares shot up to $44 a share, showing investors had faith a deal would soon come. Altera may have turned down the price of $54 a share but it has been made known that the two CEO’s had been in negotiations to try and initiate the deal again. Sources from the New York Post say it would not be a surprise if the deal “comes together quickly.”

Reason for the M&A?

The deal for Intel that they are looking for would help diversify the core business for the personal computer consumer. Altera makes an increasingly in demand chip called a “field programmable gate array” or FPGA. These chips are increasingly being used in data centers, which is Intel’s dominate business. Intel’s top customers happen to be Microsoft, Google, Facebook and Amazon for their data center chips. These customers are going to want flexibility in their hardware as software changes and Altera brings that to them with their programmable chips FPGA.

Intel Defense

Stacy Rasgon of Bernstein Research commented that, “Intel would be spending a ton of money, which they don’t really have, to drive no upside; we can argue even more that this would be defensive in nature- some of those FPGAs showing up in the datacenter are enabling customers to buy fewer servers, foundry efforts appear delayed, and in general this could easily be viewed as just one more piece of evidence that Intel’s core businesses are under pressure”.  Intel’s revenues have been down on pc sales, so the company will be largely dependent on the revenues coming from its server chips.

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In Pre market, Altera traded to $47.75 a share, up 27% this year. Altera’s 52 week range is from $30.47-$47.90. Intel has had little change on any merger news.