In the latest in a flurry of technology industry acquisitions, Intel is snapping up Altera Corporation in a $ 16.7 billion all-cash deal. Altera brings field-programmable gate area (FPGA) technology to Intel’s treasure chest.
Intel expects the acquisition to drive the production of a new product class that meets changing customer requirements in the data center and Internet of Things (IoT) market segments. For example, Intel plans to offer Altera’s FPGA products with Intel Xeon processors as customizable integrated products while also improving Altera’s existing lineup with Intel’s integrated device manufacturing model.
“Intel’s growth strategy is to expand our core assets into profitable, complementary market segments,” said Brian Krzanich, CEO of Intel, noting that the buy will help the company tap into Moore’s Law to create a new generation of solutions that can do more.
Innovative FPGAs
With the capabilities the Altera acquisition will bring, Krzanich is aiming at customers looking to drive new growth in the network, running large cloud data centers or IoT initiatives that demand stronger performance at lower costs. This is the “promise of Moore’s Law,” he said.
Intel and Altera are not exactly strangers. The companies have partnered in the past to collaborate and develop multi-die devices that leverage the strength of both companies. Altera and Intel also have a foundry relationship, in which Intel is manufacturing Altera’s Stratix 10 FPGAs and system-on-chips using its 14nm Tri-Gate process.
“We believe that as part of Intel we will be able to develop innovative FPGAs and system-on-chips for our customers in all market segments,” said John Daane, President, CEO and Chairman of Altera. When the ink dries on the deal, Altera will officially become an Intel business unit. Intel plans to continue support and development for Altera’s ARM-based and power management product lines.
Industry Consolidation
We caught up with Zeus Kerravala, principal analyst at ZK Research, to get his thoughts on the acquisition. He told us the deal has been rumored for a while.
“Altera fills a pretty big gap for Intel. Altera has the two de facto standards when it comes to FPGAs, which are the middle step between pure ASIC and off-the-shelf processors so it gives you a lot of configurability for the customers,” he said. “FPGA is becoming increasingly popular and Intel didn’t really have a play there.”
As Kerravala sees it, Altera’s technology gives Intel a much stronger position in data centers and telecom segments, where it has been trying desperately to gain market share. While Intel plays in the space, it does not have the dominance it has in servers and PCs.
The Intel acquisition follows Avago’s announced $ 37 million merger with Broadcom last week. Kerravala said the chip space is consolidating, in part, because there are far too many chip suppliers for the market demand.
“These acquisitions consolidate the industry down and create some pricing benefits as well,” he said. “As with most industries, as the chips base has grown more diverse with more solutions . . . smaller companies and startups are getting consolidated into larger organizations.”
Intel plans to fund the acquisition, which is expected to close within six to nine months, with a combination of cash from the balance sheet and debt.
