Wed, Jun 03, 2015 - Page 14 News List

Intel hopes for better with Altera bid

Bloomberg

Intel Corp chief executive Brian Krzanich said the chipmaker’s planned US$16.7 billion purchase of Altera Corp will advance its products and bolster manufacturing prowess. To deliver on that promise, he would need to break from his predecessors’ lackluster acquisition record, records showed.

Buying Altera, Intel’s largest-ever deal, would let Intel add functions to its chips for servers — a market it already dominates — and expand use of the processors, Krzanich said on Monday during a conference call.

Intel chief financial officer Stacy Smith said that by moving Altera’s chip manufacturing to Intel plants, the company would be able to field cheaper, more efficient chips that data center operators need.

Intel has touted potential new product capabilities and better manufacturing in the past to justify pricey purchases, only to see the promise of those deals fizzle out in subsequent years.

The company’s acquisition of McAfee Inc for US$6.59 billion in 2011 and the purchase of Infineon Technologies AG’s baseband unit in 2010 for about US$1.4 billion have so far failed to generate meaningful profit from software or give the company a foothold in mobile devices, financial data show.

Infineon and other Intel purchases more than a decade earlier have so far failed to help the company woo customers for communications chips, a fast-growing business led by Qualcomm Inc and MediaTek Inc (聯發科).

The addition of McAfee, which makes Internet security programs, also has not given Intel its expected boost from software. Intel said the McAfee deal was aimed at integrating stronger security into processors themselves and making computing systems safer.

“The McAfee deal a couple of years ago, that really has not played out to Intel’s benefit,” Chicago-based Morningstar Inc analyst Abhinav Davuluri said.

The Altera acquisition is “considerably different because you actually have a tangible product you are selling,” Davuluri said.

Intel’s offer for Altera, a maker of programmable chips, would do more than just add the smaller company’s US$1.93 billion in sales to Intel’s US$55.9 billion in revenue, Intel executives said.

Combining a programmable logic chip with a processor in a server computer used by, say, Google Inc, would make the machine faster at functions like recognizing a face in a picture or encrypting data, Intel said.

The ability to program the chip would also allow it to switch between those dedicated functions more quickly, they added.

Because Intel already works as an outsourced manufacturer for Altera, the transition to making chips that combine the two companies’ products would be much faster, avoiding the delays that can result from adapting another company’s technology to its production lines, Smith said.

Some of Intel’s mobile chips are still made by Taiwan Semiconductor Manufacturing Co (台積電), which builds Infineon’s chips — underscoring the difficulty of bringing outside manufacturing in-house for Intel.

Intel executives were undaunted by questions about the Altera deal and the challenges that Intel might face in combining the companies’ offerings.

Smith said products would be out by the end of next year that combine Altera chips with Intel’s Xeon processors in the same package, and those that build them into the same piece of silicon shortly after that.

“That is a quick time line,” he said.

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