Late last week WSJ heard from its sources that Intel is in advanced talks to buy FPGA chip maker Altera. The chip giant regularly takes over firms but the size of this deal is unlike anything we've ever seen from Intel.
The $7.68 billion acquisition of McAfee in 2010 is Intel's largest takeover to date but given Altera's current market cap of $13.36 billion this deal could potentially be twice as big. If the deal goes through it will be the largest acquisition in Intel's history.
Altera is world's second-largest designer of FPGA chips, which are used in a wide variety of electronics devices for industrial, military, automotive, medical and mobile applications. The two companies aren't strangers, the firms have been working together for several years and Altera is the largest client of Intel's custom foundry business.
FPGAs are vastly different from the microprocessors manufactured by Intel, FPGAs are basically a blank slate of reprogrammable cells that can be configured by clients to meet their own specific needs after manufacture. Altera and market leader Xilinx have been expanding the FPGA market at a rapid pace in recent years, pushing into new markets where clients traditionally designed chips from scratch. By focusing on very specific tasks, FPGAs can be much faster and much more efficient than the chips in your computer, which are hard-coded to perform a set of general functions.
Buying Altera would further solidify their manufacturing partnership, and help Intel keep its factories full. Still, a tie-up with Altera may not help Intel place more of its chips in smartphones, now a major gap in its portfolio as more computing activities take place in pocket-size products. A deal indirectly could help Intel in the mobile market; Altera chips are widely used in the wireless base stations that connect cellphone users.
A combination would add a fast-growing business to Intel; Altera’s revenue is climbing faster than Intel’s—up 12% to $1.93 billion last year while Intel’s rose 6.1% to $55.9 billion.