Intel Ends The Rumor Mill, Plans To Acquire Altera To Spur Internet of Things Business

After an on-again, off-again courtship, Intel said Monday that it plans to acquire custom-design semiconductor manufacturer Altera.

The deal is valued at $16.7 billion, or $54 per share, according to Intel, Santa Clara, Calif. Intel shares inched up 2 percent to $34.52 in premarket trading Monday, while Altera's shares rose 6.3 percent to $51.94, according to The Wall Street Journal.

Reports of Intel acquiring San Jose, Calif.-based Altera to bolster its Internet of Things business first emerged in March. The discussions broke off in April, after Altera reportedly rejected an offer from Intel of $54 per share, spurring anger from Altera's investors, according to The Wall Street Journal. Talks reportedly resumed in May.

[Related: Partners Cheer As Altera-Intel Buyout Talks Reportedly Resume]

"With this acquisition, we will harness the power of Moore's Law to make the next generation of solutions not just better, but able to do more," said Intel CEO Brian Krzanich in a statement. "Whether to enable new growth in the network, large cloud data centers or IoT segments, our customers expect better performance at lower costs. This is the promise of Moore's Law and it's the innovation enabled by Intel and Altera joining forces."

Altera manufactures field programmable gate arrays (FPGAs) that include programmability, security and high-performance features for Internet of Things solutions, such as Smart City infrastructure and Smart Grid.

Intel said it plans to offer Altera's FPGA products, along with its Xeon data server chip portfolio.

Intel and Altera have an existing foundry partnership, as Altera in 2013 said it would utilize Intel's technology in its chip design. After the transaction is completed, Altera will become an Intel business unit, while Intel will continue to support and develop Altera's ARM-based and power management product lines.

Intel has been bolstering its efforts around the Internet of Things, a business division that contributed $2.1 billion in sales in 2014, up 19 percent from its $1.8 billion in 2013.

"This is really about enhancing Intel's technology and set of intellectual property in the data center," said Todd Swank, senior director of product marketing at Equus Computer Systems, a Minnetonka, Minn.-based system builder. "With the Internet of Things, you're taking a device and adding intelligence to that device. Intel is playing into its strength of building powerful technology to process that data stream being generated from the Internet of Things. I think this will help them be competitive in the future to process that data."

"This is something Intel had to do," he added. "Companies like Altera are being gobbled up as the benefits of high-end computing become apparent. It makes sense for Intel and it is great for Altera, and it will eventually be a good thing for the channel, though it will take time before we see any benefits. Anything that makes Intel stronger makes its channel stronger."

Intel's planned buyout of Altera is the latest in a string of consolidation and acquisitions in the semiconductor business.

Last week, Avago unveiled its planned $37 billion acquisition of rival company Broadcom. According to The Wall Street Journal, ARM is in talks to buy Israeli mobile security company Sansa. And last month, Dutch chip maker NXP Semiconductors said it would acquire smaller U.S. rival Freescale Semiconductor.

Intel expects the acquisition to close in six to nine months.

PUBLISHED JUNE 1, 2015