Intel's FPGA division, Altera, is reportedly nearing a significant acquisition by private equity firm Silver Lake, as reported by Bloomberg. Sources indicate that the deal is in the final negotiation stages, although the timeline for an official announcement remains uncertain. Details regarding the financial terms and the size of Silver Lake's stake are still unconfirmed.
Silver Lake is competing against other private equity firms, including Bain Capital and Francisco Partners, for Altera. The firm has a strong history of investing in major tech companies such as Dell Technologies and Broadcom, which underscores its expertise in the semiconductor sector. Silver Lake's interest in acquiring Altera dates back to January, highlighting its commitment to expanding its semiconductor portfolio.
Altera specializes in field-programmable gate arrays (FPGAs), which are essential in the semiconductor industry. Unlike standard processors, FPGAs can be programmed for specific tasks, enhancing performance in areas like artificial intelligence (AI) and networking. This flexibility has made FPGAs increasingly valuable, especially in AI-driven markets.
Intel acquired Altera in 2015 for nearly $17 billion, positioning it against AMD, which bolstered its FPGA capabilities with the $49 billion acquisition of Xilinx in 2022. However, Intel has struggled to maintain its market dominance, leading to strategic shifts in its business model.
The potential sale of Altera could provide Intel with financial relief amid declining revenues and increasing competition. The company has faced challenges in the AI chip market and has lost ground to AMD in both the PC processor and data center segments. In response, Intel has announced plans to restructure, including spinning off its manufacturing division to focus on chip design.
Leadership changes at Intel have also influenced its strategic direction. Former CEO Pat Gelsinger had initially planned to retain a small stake in Altera while pursuing an IPO. However, following Gelsinger's departure in December, interim co-CEOs David Zinsner and Michelle Holthaus are exploring cost-cutting measures, which may involve divesting Altera entirely.
Altera is not the only Intel division attracting interest. Industry leaders Broadcom and TSMC are reportedly looking at other Intel assets. Broadcom is evaluating Intel's chip design division, while TSMC is considering a stake in its chip fabrication operations. This speculation has positively impacted Intel's stock, which has risen over 16% and increased by 29% this year, despite a significant 60% decline in 2024.
Intel's recent earnings report surpassed Wall Street expectations, but the outlook for the current quarter remains uncertain due to weak demand for data center chips. As the company searches for a permanent CEO, investors and analysts are closely monitoring how these potential deals could influence Intel's future. If the Altera sale goes through, it could represent a pivotal moment in Intel's efforts to regain financial stability and redefine its position in the evolving semiconductor landscape.
