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
Access Investor Kit for Altera Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0214411003
Access Investor Kit for Intel Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4581401001
Access Investor Kit for Xilinx, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US9839191015
Subscribe to WSJ: http://online.wsj.com?mod=djnwires