Intel announced on Monday that they would pay $16.7 billion in order to acquire Altera, one of its competitors. Altera is famous for its programmable components. Despite the declining revenue of Altera, Intel offers a 10.5% premium with a $54 per share price. Intel never did before such an important acquisition. Opinions differ about the benefit of this acquisition. In fact many investors think that Intel overpays for Altera. Analysts believe that Altera is worth only $28 per share.
Altera generated a $1.9 billion revenue and have 3 000 employees. While the PC sales of Intel are decreasing, Intel considers this acquisition as a way to reinforce its market position outside the PC sector. They are going to develop products with higher profit margins such as data center processors.
What they are playing for in this acquisition is quite important. Intel missed the wave of mobile growth and so they have to become well positioned on the “Internet of Things” space. According to Brian Krzanich, the CEO of Intel, Altera acquisition will allow the firm to increase its performance, especially for the data center applications.
In 2014, the revenue from the data center products increased by 14% whereas the PC sales only grew up about 4%. Nevertheless, the PC sales still weigh 62% of the total turnover. So, Altera acquisition will allow the company to change its strategy in order to be more competitive. The CEO affirmed that Intel would also be more able to diversify it range of products thanks to this deal.
The buyout would be finished within 6-9 months but the uncertainty remains on the stocks evolutions. Following the announcement, Altera shares gained almost 6% and reached a new 52-week high of $51.91. About Intel, its shares felt 1.6% to $33.90. Investors are worried about how Intel plans to generate return and they are disappointing about the lack of available information. Nevertheless, semi conductor stocks seems to be a great investment because this industry recorded sales growth of 9.9% in 2014 and we expected a year-over-year growth of 3,4% in 2015. As Intel number one in the semi conductor industry, the recovery of the stock might happen soon..