By Don Clark 

Intel Corp.'s plan to buy Altera Corp. appears to have stalled, at least for now.

Talks between the Silicon Valley chip makers have broken off, people familiar with the matter said. Yet Altera's shares traded higher for most of the trading session Thursday, as some investors apparently bet that a buyout may yet take place.

CNBC reported the breakdown in talks early in the day, initially sending Altera's stock downward. But the stock soon rebounded, trading at 4 p.m. at $43.33, up 3%, putting its current market value at about $13 billion.

Altera rejected an offer from Intel in the low $50-per-share range, one of the people said. The Wall Street Journal first reported March 27 that the two companies were in advanced deal talks. Altera's shares had closed the previous day at $34.58, surging 28% to $44.39 following the Journal report.

The talks might be rekindled, and there could still be a deal between the companies. The fact that Altera's stock rose on news that the negotiation had ended may reduce any pressure on the company to return to the table, however.

Doug Freedman, an analyst at RBC Capital Markets, said Altera's management may face pressure to boost its share price if the Intel deal doesn't materialize. "If in fact management did turn down a $50+ offer, investors will want to know what kind of plans management has to achieve a $50+ stock price in the next number of years," he wrote in a research note.

The two companies are big players in different segments of the semiconductor industry. Intel, a much larger company, is well-known for supplying the microprocessors used in most personal computers and server systems.

Altera, along with Xilinx Inc., specializes in chips known as field-programmable gate arrays that are designed to be configured by customers to handle specific chores. Some of its latest FPGAs, as the chips are called, are manufactured by Intel under a previously announced partnership.

Besides desiring to acquire a company with faster revenue growth, some analysts believe Intel wants Altera to help defend its position in server chips. Some customers, including Microsoft Corp., have begun using FPGAs alongside Intel Xeon chips to get much greater performance for some kinds of computing jobs.

Bruce Kleinman, an industry consultant at FSVadvisors who once worked at Xilinx, said Altera and Xilinx have also been offering an even more potent variant of the same concept: FPGAs that include processor circuitry licensed from Intel rival ARM Holdings PLC, the mainstay technology in most mobile devices.

Putting the two kinds of chip on one piece of silicon yields much greater performance than two chips that are situated near each other in a device, Mr. Kleinman said. Intel needs to offer an alternative based on its own technology to putting ARM functions on an FPGA, and the only practical way to do that is owning a company that makes those chips, he said.

Server chips are the "golden cow" for Intel, Mr. Kleinman said. "If I'm the server guy at Intel, I want to do everything in my power to preserve my very profitable No. 1 position."

Intel's shares traded at 4 p.m. Thursday at $31.24, up 7 cents. Its investors had also cheered the possibility of a purchase of Altera, with Intel stock rising sharply the day word of the talks surfaced.

Dana Cimilluca contributed to this article.

Write to Don Clark at don.clark@wsj.com

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