Insider sources say Intel won't be buying Altera after all, but the reported collapse of talks between the two companies has already spurred talk that Chipzilla may turn its attention to acquiring someone else – with Broadcom topping the list of candidates.
Bloomberg was first to report that Altera, a maker of field-programmable gate arrays (FPGAs), had rejected Intel's buyout offer, which reportedly came in at roughly $54 per share. At press time, Altera's stock price is around $44 per share.
The negotiations were secret – assuming they happened at all – but rumors that Intel was sniffing around Altera first surfaced in March. It seemed like a good match. Intel has lately been mating its Xeon server CPUs with FPGAs as a way to allow customers to develop custom coprocessors for specialized workloads. Altera, meanwhile, has been fabbing chips in Intel foundries since 2013.
Altera's stock price rocketed up 28 per cent once investors caught word of a potential merger. Curiously, it climbed another 5 per cent when reports emerged that the deal had been scrapped. According to analysts, that latter spike was because Intel's offer was so generous that Altera may yet be forced to accept.
Yet word that Intel would drop its bid for Altera has already led to speculation that it may spend its money on a different acquisition instead, with Broadcom said to be a likely target.
Broadcom makes chips for wired and wireless communications. Intel does, too, but it hasn't been doing very well at it. Its Mobile and Communications business unit lost $4.2bn in 2014 and $3.1bn the year before that. Acquiring a successful company in the communications sector could be one way to stanch the bleeding.
That will be easier said than done, though. At its current share price, Altera has a market capitalization of around $13.2bn. Broadcom's market cap, on the other hand, is $26.5bn, which is more than Intel has cash on hand.
Nor is this the first time Intel has been said to be considering gobbling Broadcom. Similar rumors have cropped up repeatedly in recent years but nothing has ever come of them.
More likely, Intel is playing hardball in its negotiations with Altera in hopes of convincing the smaller firm that walking away from its offer would be a mistake – a sentiment echoed by more than one financial analyst.
"What are they [Altera] thinking?" Northland Securities analyst Gus Richard told Bloomberg. "They're going to come under a huge amount of pressure to take that offer. Earnings aren't going to be that great." ®