Intel to Buy Altera for $16.7B

News Analysis Ray Le Maistre, Editor-in-Chief 6/2/2015

Intel has opened its wallet again to snap up programmable chip specialist Altera for $16.7 billion in cash.

The deal had been expected after reports of talks leaked earlier this year. (See Report: Intel Buying Altera?)

It follows Intel's move earlier this year to acquire home gateway and broadband access components vendor Lantiq. (See Intel Targets 'Smart Home' With Lantiq Acquisition.)

Intel Corp. (Nasdaq: INTC) notes that it will be able to combine its Xeon processors with Altera Corp. (Nasdaq: ALTR)'s field-programmable gate array (FPGA) products to develop "highly customized, integrated products" that better target the needs of the data center and IoT markets.

Altera also develops products for microwave backhaul and radio access network baseband applications -- "FPGAs are a keystone of CRAN architecture" the company notes on its website -- as well as test and measurement, OTN transport and other verticals, such as automotive and broadcast.

In the first quarter of this year, Altera generated revenues of $435.5 million, down 6% year-on-year, and net income of $94.9 million, compared with $116.5 million in the first quarter of 2014.

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The deal makes sense for both companies, says Heavy Reading contributing analyst Simon Stanley. "Altera will use Intel fabs for the latest 14-nm FPGAs, while Intel gets FPGA technology so customers can customize their solutions for data center, mobile and other embedded markets where they want to compete with ARM," notes Stanley. "And Altera gets the scale and fab access to compete with Xilinx," he adds.

The deal follows hot on the heels of other major M&A deals in the networking components sector:

— Ray Le Maistre, , Editor-in-Chief, Light Reading