Intel’s Pursuit Of Altera Ends After Price Disagreement

EnterpriseMerger and acquisition

Altera officials reportedly turn down a per-share price of more than $50, thought at least one analyst doubts whether the deal is off

Intel’s negotiations to buy chip maker Altera have broken off over disagreements on the price, according to multiple reports.

Altera officials rejected Intel’s offers of a per-share price around $54, according to reports from Bloomberg and CNBC. The news comes about two weeks after rumors surfaced that Intel was in the market to buy Altera for about $10.4 billion, a deal that would have been Intel’s largest since it bought security software maker McAfee in 2011 for about $7.7 billion.

Spokespeople for Intel and Altera declined to comment on those rumors at the time, and now are not commenting on the reports that the deal has fallen through. The two sides have not talked for about a week, according to the CNBC report.

Extend its reach

The deal was seen as a good one for Intel, which is the dominant chip supplier for PCs and servers but is looking to extend its reach into faster growing markets, including mobile devices like tablets and smartphones as well as the Internet of things (IoT) and wearable technology. Altera is the top maker of field-programmable gate arrays (FPGAs), processors that can be programmed through software and are becoming increasingly popular as accelerators that improve system performance while keeping power consumption down.

It’s one of the reasons why at least one analyst is unsure whether the deal is actually dead, or Altera’s reported rejection of Intel’s offer is a negotiation tactic. Altera could have wanted to show that the offer was too low (its stock rebounded after initially falling after reports of the break-off of negotiations), according Patrick Moorhead, principal analyst with Moor Insights and Strategy.

“I don’t know if this is over or not,” Moorhead told eWEEK. “I’m not convinced the deal is over. This could be the second or third wave of discussions.”

However, it could put pressure on Altera’s board of directors to show what the next step would be if a deal with Intel doesn’t happen, he said. “Altera is far ahead with some of its tools [for FPGAs], but it’s not the only game in town,” Moorhead said, noting that other vendors like Xilinx also sell FPGAs.

IntelA deal would be the latest step in the relationship between the two companies. Intel officials in 2013 said the company would manufacture Altera’s ARM-based quad-core Stratix 10 processors, and a year later expanded the partnership to include multi-die devices, integrating Altera’s FPGAs and systems-on-a-chip (SoCs) with other components—from memory to application-specific ICs to processors—into a single package.

The interest in FPGAs is another indication of the trend toward more heterogeneous data centres, where systems leverage accelerators like FPGAs and GPUs to help drive system performance, increase energy efficiency and enable greater workload optimisation, Moorhead said. Organisations are increasingly less like to want systems that run only on a genera-purpose CPU.

Using GPUs or FPGAs bring with them their own challenges around software models, but the benefits of greater power efficiency make the extra software work worth it. A prime example are Bitcoin mining companies, which over a period of two years went from standard general-purpose CPUs to GPUs, digital signal processors (DSPs) and then fixed-function controllers in an effort to find the best technologies for creating powerful and efficient systems, he said.

Intel would benefit by having Altera’s FPGA business in the fold, given that the technology—used in a range of applications like cars and phone networks—would give the world’s top chip maker greater traction in areas such as mobile devices and IoT.

The deal also would mark the second recent significant deal in the chip space. Earlier in March, NXP Semiconductors announced it is buying Freescale for $11.8 billion.

Originally published on eWeek.

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