Intel has spun off its programmable solutions group as a standalone FPGA company, selling a majority stake in the company to a private equity firm.
Intel is taking a fairly hefty loss on this deal. It acquired Altera in 2015 for $16.7 billion but the deal with Silver Lake technology investments values Altera at $8.75 billion total, with Intel getting $4.4 billion for the sale.
Silver Lake will own 51% of Altera, which Intel spun off as an independent company earlier this year with veteran executive Sandra Rivera at the helm. Intel also announced that Raghib Hussain will succeed Sandra Rivera as chief executive officer of Altera, effective in early May. Hussain comes to Intel from Marvell Technology.
Silver Lake’s acquisition of Altera is expected to close in the second half of this year.
The deal was hinted at earlier this month when newly-minted CEO Lip-Bu Tan told customers and partners Intel was looking at paring down its product offerings to focus on core technology.
“Today’s announcement reflects our commitment to sharpening our focus, lowering our expense structure and strengthening our balance sheet,” said Tan in a statement. ”We look forward to partnering with Silver Lake upon closing of the transaction, as their industry expertise will help to accelerate Altera’s efforts and unlock additional economic value for Intel.” Tan joined Intel as CEO just one month ago.
Altera will continue offering field-programmable gate array (FPGA) products across a wide range of use cases, including automotive, communications, data centers, embedded systems, industrial, and aerospace.
“People were a bit surprised at Intel’s sale of the majority stake in Altera, but they shouldn’t have been. Lip-Bu indicated that shoring up Intel’s balance sheet was important,” said Jim McGregor, chief analyst with Tirias Research.
The Altera has been in the works for a while and is a relic of past mistakes by Intel to try to acquire its way into AI, whether it was through FPGAs or other accelerators like Habana or Nervana, note Anshel Sag, principal analyst with Moor Insight and Research.
“Ultimately, the 50% haircut on the valuation of Altera is unfortunate, but again is a demonstration of Intel’s past mistakes. I do believe that finishing the process of spinning it out does give Intel back some capital and narrows the company’s focus,” he said.
So where did it go wrong? It wasn’t with FPGAs because AMD is making a good run of it with its Xilinx acquisition. The fault, analysts say, lies with Intel, which has a terrible track record when it comes to acquisitions.
“Altera could have been a great asset to Intel, just as Xilinx has become a valuable asset to AMD. However, like most of its acquisitions, Intel did not manage Altera well,” said McGregor.
“I think AMD went into it with a better idea of how the two companies would integrate and I also believe Xilinx was a much more mature and competitive player in the FPGA market,” said Sag.
Source:: Network World