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Intel Shortlists Suitors for Programmable Chip Arm Altera

Daniel Nenni

Admin
Staff member
787b238e64352af4d6fd514b913c2c61


(Bloomberg) -- Intel Corp. has shortlisted a number of buyout firms for the next round of bidding for its Altera unit, according to people familiar with the matter, as the beleaguered chipmaker makes headway on a process started by its now ousted chief executive officer.

Private equity firms including Francisco Partners and Silver Lake Management are competing alongside Lattice Semiconductor Corp. in a second round for Altera, which specializes in the design of low-power programmable chips, the people said, asking not to be identified discussing confidential information.

Apollo Global Management Inc. and Bain Capital are also pursuing Altera, the people said.

Intel is giving suitors toward the end of January to formalize their offers, the people said. It’s possible other bidders could emerge or the process could end without a sale, they added.

Representatives for Intel, Apollo, Bain Capital, Francisco Partners and Silver Lake declined to comment. A spokesperson for Lattice didn’t immediately respond to a request for comment.

The move by Intel to advance the process that was started by former CEO Pat Gelsinger is a sign that the company — previously the world’s biggest chipmaker by revenue over almost three decades — is eager to see through already announced plans, even as some have criticized the pace of progress on other initiatives.

After calling for initial bids prior to the US Thanksgiving holiday in November, Intel has been presented with deal-structure options that range from acquiring a 20% to 30% stake to taking full control of Altera, the people said. Some parties have outlined multiple paths in their proposals, which value the unit at as little as $9 billion to more than $12 billion, according to the people. Intel paid roughly $17 billion to acquire Altera in 2015.

For Lattice, any attempt to gain control of the business could prove difficult. Lattice has a market value of $8 billion and is likely to require additional firepower, potentially from a financial partner, to prevail.

Intel Chief Financial Officer David Zinsner, who was named interim co-CEO alongside Michelle Johnston Holthaus this month, told investors at an industry conference that the chipmaker “kicked off” the process to engage with outside investors.

“Our thinking is we’ll get another partner in similar to what we did with the IMS business,” Zinsner said at the Barclays Global Technology Conference last week.
Intel sold a 20% stake in its IMS Nanofabrication business in June 2023 to Bain Capital Special Situations in a deal that valued that unit at approximately $4.3 billion. Three months later, it announced the subsequent sale of a 10% stake in IMS to Taiwan Semiconductor Manufacturing Co. at the same valuation. IMS supplies so-called multibeam mask writing tools that some of the world’s largest semiconductor manufacturers use to produce chips.

 
I was just talking to FPGA friends and was told that the competitive distance between Xilinx and Altera is the biggest it has ever been and getting bigger. Selling Altera to Lattice would be the best solution (strong distribution channel) but the competitive trench will still increase. The Xilinx relationship with TSMC is the strongest it has ever been since the AMD acquisition while Altera is hampered by Intel's delays and other distractions.

Intel (BK) bought Altera for $16.7B dollars cash and has put billions of dollars into it. Any guesses as to the net loss here? What a waste of technology. Back in the 40nm and above days Altera was king but Xilinx moved to TSMC at 28nm and it has been a dumpster fire ever since, my opinion.

From what I hear Altera will do $3B+ this year. Any idea of what part of AMD's revenue FPGAs are? I don't think they break it out. My guess would be $4-5B.
 
I was just talking to FPGA friends and was told that the competitive distance between Xilinx and Altera is the biggest it has ever been and getting bigger. Selling Altera to Lattice would be the best solution (strong distribution channel) but the competitive trench will still increase. The Xilinx relationship with TSMC is the strongest it has ever been since the AMD acquisition while Altera is hampered by Intel's delays and other distractions.

Intel (BK) bought Altera for $16.7B dollars cash and has put billions of dollars into it. Any guesses as to the net loss here? What a waste of technology. Back in the 40nm and above days Altera was king but Xilinx moved to TSMC at 28nm and it has been a dumpster fire ever since, my opinion.

From what I hear Altera will do $3B+ this year. Any idea of what part of AMD's revenue FPGAs are? I don't think they break it out. My guess would be $4-5B.

If Altera's current revenue is around $3 billion, the reported bid price of $9 billion to $12 billion represents 3x to 4x its revenue. This valuation is on the low end for the semiconductor industry, according to a revenue multiple study conducted by New York University (link below). The study indicates that the average revenue multiple (price/sales) for the semiconductor industry is approximately 10.2. However there are many methods to calculate a company's value, and "revenue multiple" is just one of them.

 
If Altera's current revenue is around $3 billion, the reported bid price of $9 billion to $12 billion represents 3x to 4x its revenue. This valuation is on the low end for the semiconductor industry, according to a revenue multiple study conducted by New York University (link below). The study indicates that the average revenue multiple (price/sales) for the semiconductor industry is approximately 10.2. However there are many methods to calculate a company's value, and "revenue multiple" is just one of them.

I think a multiple of 10 makes sense. It also aligns with what DZ mentioned at the recent conference: bringing in outside investors, cleaning up the business, and then pursuing an IPO. I assume they want to retain a majority stake in the business before the IPO.
 
I think a multiple of 10 makes sense. It also aligns with what DZ mentioned at the recent conference: bringing in outside investors, cleaning up the business, and then pursuing an IPO. I assume they want to retain a majority stake in the business before the IPO.
Can't agree. Not saying some fool might not pay 10x revenues, but that's almost certainly a PE ratio of well over 50 for a fairly mature business. By any sensible historical standards, an industry wide price:sales of 10 for semis is off the chart and only made sense for periods or specific sectors with exceptional growth. Hard to argue that FPGA is one of those. Add in the fact that Altera clearly needs turning around and will be discounted for that.
 
Can't agree. Not saying some fool might not pay 10x revenues, but that's almost certainly a PE ratio of well over 50 for a fairly mature business. By any sensible historical standards, an industry wide price:sales of 10 for semis is off the chart and only made sense for periods or specific sectors with exceptional growth. Hard to argue that FPGA is one of those. Add in the fact that Altera clearly needs turning around and will be discounted for that.
It is relative. Relative to market trends.
 
I was just talking to FPGA friends and was told that the competitive distance between Xilinx and Altera is the biggest it has ever been and getting bigger. Selling Altera to Lattice would be the best solution (strong distribution channel) but the competitive trench will still increase. The Xilinx relationship with TSMC is the strongest it has ever been since the AMD acquisition while Altera is hampered by Intel's delays and other distractions.

Intel (BK) bought Altera for $16.7B dollars cash and has put billions of dollars into it. Any guesses as to the net loss here? What a waste of technology. Back in the 40nm and above days Altera was king but Xilinx moved to TSMC at 28nm and it has been a dumpster fire ever since, my opinion.

From what I hear Altera will do $3B+ this year. Any idea of what part of AMD's revenue FPGAs are? I don't think they break it out. My guess would be $4-5B.
The divergence at 28nm was in part due to Xilinx convincing TSMC to roll their own FPGA-friendly version (28HPL), optimizing power & performance for the logic fabric at that density. Gumption points for the Xilinx R&D execs at that time.
 
The divergence at 28nm was in part due to Xilinx convincing TSMC to roll their own FPGA-friendly version (28HPL), optimizing power & performance for the logic fabric at that density. Gumption points for the Xilinx R&D execs at that time.

The divergence was also because Xilinx beat Altera to Silicon on 28nm for the first time in many years. First silicon in the FPGA business meant a lot back then.
 
I think a multiple of 10 makes sense. It also aligns with what DZ mentioned at the recent conference: bringing in outside investors, cleaning up the business, and then pursuing an IPO. I assume they want to retain a majority stake in the business before the IPO.

Cleaning up means firing a lot of people I imagine.

Sounds like revenue isnt gonna get pumped by any of those looking to buy it , so cost slashing would seem the order of the day.
 
When AMD acquired Xilinx for $35B, it had $4B revenue. If the multiple is roughly the same, Altera should worth $26B.
 
When AMD acquired Xilinx for $35B, it had $4B revenue. If the multiple is roughly the same, Altera should worth $26B.

Xilinx was an all-stock transaction, and I remember thinking at the time that the AMD stock was overvalued. The value of the deal was $35B but it was not equal to $35B in cash in my thinking. It also followed the Intel acquisition of Altera, so AMD paid a premium to better compete with Intel. I think Intel overpaid for Aletra as well. Those very different times.

I have worked for start-up companies since early in my career. Today I assist with acquisitions and have been involved with more than a dozen transactions. The valuation is very different when there is 1 or 2 offers versus 3 or 4. The standard valuation is 3-4 times revenue unless there are multiple offers which is usually the case. I have seen some absolute steals but mostly companies pay a premium. M&A is a high stakes poker game with a lot of big egos in play thus the high valuations.

I view Altera as a cash cow with limited potential for market growth. Lattice could certainly milk the cow the longest since they have a channel and are lean and would make Altera lean as well. Unfortunately, Lattice cannot afford Altera so it would be a merger of sorts. Wafer/packaging cost is also an issue. How much is Altera paying Intel for chips now that they are spun out?

If a finance company is going to buy Altera my suggestion would be to go big and roll up Altera, Lattice, and Achronix. Corner the market and really go after Xilinx. It would also mean consolidating foundries which would be TSMC.

Just my opinion of course, life is short, go big or stay home.
 
Altera is far larger than Lattice - Lattice serves a very specific niche in the FPGA domain, while Altera serves a far greater extend and most important much more lucrative markets than Lattice. It is going to be kinda sad for Lattice to takeover Altera because this demonstrates the decimation of a company....
 
Altera is far larger than Lattice - Lattice serves a very specific niche in the FPGA domain, while Altera serves a far greater extend and most important much more lucrative markets than Lattice. It is going to be kinda sad for Lattice to takeover Altera because this demonstrates the decimation of a company....

Ture, maybe QCOM or BRDCM? Or maybe Altera goes IPO? Intel needs cash and Intel does not need Altera, my opinion.
 
I am tutoring an FPGA subject this semester. For the course, they chose Altera as the platform. I thought they would use Xilinx, but perhaps they believe Quartus is better suited for students.

Altera does support oneAPI, which means a single piece of code can work on both Intel FPGAs and Intel GPUs. I plan to try that out.
 
I think a multiple of 10 makes sense. It also aligns with what DZ mentioned at the recent conference: bringing in outside investors, cleaning up the business, and then pursuing an IPO. I assume they want to retain a majority stake in the business before the IPO.
10x Revenue? Not a chance. AMD is currently 8x revenue. Altera I think would be 4-6x revenue.

Intel will probably roughly break even on this. I think they will sell for around $16b. FPGA is no longer considered a strategic growth area like it was a few years ago.
 
10x Revenue? Not a chance. AMD is currently 8x revenue. Altera I think would be 4-6x revenue.

Intel will probably roughly break even on this. I think they will sell for around $16b. FPGA is no longer considered a strategic growth area like it was a few years ago.
Would you exchange an item valued at $100 for $60? I don't think so.

That's why they prefer an IPO. The objective is not just to raise cash but to accurately reflect Intel's value based on SOTP (Sum of the Parts). At the moment, the valuation is off the mark.

If they want to save money, trimming middle management would be a more effective approach.
 
This can be seen in the case of Intel Capital. They did not offload the assets of Intel Capital but instead restructured it as an independent fund to manage its VC investments. They mentioned that this would allow the fund to expand by accepting external funding. This indicates that the restructuring was not done to raise cash.
 
Altera is far larger than Lattice - Lattice serves a very specific niche in the FPGA domain, while Altera serves a far greater extend and most important much more lucrative markets than Lattice. It is going to be kinda sad for Lattice to takeover Altera because this demonstrates the decimation of a company....

The problem is that Altera itself is in decline.

Intel bought Altera in 2015 for $16.7 billion, so we can't get the number for Altera's 2015 full year revenue. However, we do know Altera's 2014 revenue was $1.9 billion, and 2013 revenue was $1.7 billion.

Altera's revenue for 1Q2024 was $342 million, 2Q2024 was $361 million, and 3Q2024 was $412 million. Altera hasn't announced its 4Q2024 revenue yet. If we assume 4Q2024 is similar to 3Q2024, then Altera's 2024 revenue will be estimated at about $1.527 billion.

Sadly, under Intel's ownership for nine years, Altera's revenue has shrunk. We haven't considered the inflation factor at all!
 
10x Revenue? Not a chance. AMD is currently 8x revenue. Altera I think would be 4-6x revenue.

Intel will probably roughly break even on this. I think they will sell for around $16b. FPGA is no longer considered a strategic growth area like it was a few years ago.

Intel may try to get a minimum wafer volume requirement for the Intel Foundry into the contract with the new owner. It can further decrease the final value of Altera. Any new owner definitely wants to have the freedom to decide where and when to order the products with their desired quantity.
 
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