Intel Takeover of Altera Is Expected

30 May 2015 | Author: | No comments yet »

Intel Said to Be Near Altera Purchase as Chip Deals Accelerate.

SAN FRANCISCO — Intel is close to clinching a takeover of fellow chip maker Altera for more than $15 billion, a person briefed on the matter said on Friday, the latest sign of consolidation in the semiconductor industry. SAN FRANCISCO—A potential deal for chipmaker Intel to buy Altera could help the company further diversify the market for its chips beyond personal computers into cloud computing.Dealing chips: Reports on Friday that Intel Corp. resumed talks to buy chipmaker Altera Corp. sent Intel up 1.4 percent to $34.50 and Altera up 4 percent to $48.85.

Intel is expected to pay about $54 a share for Altera, whose specialized chip designs would help Intel expand beyond chips for personal computers, this person said. The world’s largest chipmaker may reach a deal for Altera as soon as this weekend, the people said, asking not to be identified discussing private information. Another chip deal: Chipmakers Avago Technologies and Broadcom gained Wednesday on merger rumors: Broadcom rose 20 percent, to $56.40 and Avago rose 9 percent, to $143.29.

The New York Post, citing a source close to the situation, reported that Santa Clara, Calif.-based Intel was close to completing a $15 billion acquisition deal for its smaller rival. It would also underscore Intel Chief Executive Officer Brian Krzanich’s determination to expand into new markets as the personal computer industry – the company’s mainstay – loses steam. Drone: Shares of GoPro jumped 6 percent, to $56.74 Thursday after the company said it will introduce a quadcopter drone for the consumer market in 2016.

The deal will allow Intel to bundle its own server chips with Altera’s line of programmable chips, which are increasingly being used in data centres and are customised for functions such as providing quicker web-searches. The company makes integrated circuits called Field Programmable Gate Arrays (FPGAs) which can be reconfigured and reprogrammed, making them very flexible. “FPGA’s are used in cellular phone networks at the base station, so you use them every day on the other side of your phone connection,” said Mark Hung, an analyst with Gartner Research. Altera’s earlier rejection spurred some shareholders to pressure the company to reconsider an offer they thought valued Altera higher than it could reach on its own. The largest deal ever in the $300 billion semiconductor business was announced Thursday when Avago Technologies Ltd. agreed to buy Broadcom Corp. for $37 billion. Merger approval: Tobacco companies Lorillard and Reynolds American rose Wednesday after the Federal Trade Commission gave its tacit approval to their $27.4 billion merger.

In March, Freescale Semiconductor, which makes chips used in cars, agreed to a $11.8 billion cash and stock take-over by Dutch chipmaker NXP Semiconductors. News of the renewed takeover attempt comes on the heels of Avago Technologies Ltd’s $37 billion offer for Broadcom Corp – the largest merger of chipmakers ever.

They consist of millions of transistors, and once created, their performance can be changed only slightly by changing the software that works with them. The fragmented chip industry has been expected to consolidate since NXP Semiconductors said in March it would buy Freescale Semiconductor for $12 billion.

If such a deal is in place, when it expires on Monday Intel would be free to begin a hostile takeover attempt if a purchase price has not been agreed on. “Whenever you’re trying to buy a company, it’s always better when the management team agrees to the takeover, that’s always the preferred route. Intel may be seeking Altera to create computers that combine the power of a standard semiconductor with the flexibility of an F.P.G.A., by means of a board with both types of chip.

This could potentially give Intel the ability to build, for example, a computer server that can add functions so it lasts longer inside a corporate data center. Let’s play: GameStop, the video game retailer, posted results that exceeded analysts’ estimates, helped by the sale of recently released video game titles. Giant cloud computing centers have become an increasingly large part of Intel’s business, made even more significant as smartphones have lowered the demand for “Intel Inside” personal computers.

Intel now has dedicated sales teams working with big chip consumers, like Amazon.com, that tell the company its specific computing needs for its giant cloud systems.

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