The world’s biggest chipmaker, a Silicon Valley stalwart that likes to think of itself as among those turning science fiction into science fact, has taken a $16.7 billion step into the Hollywood-style realm of facial recognition software and driverless cars.
Intel, a company that even employs a “futurist” executive whose job it is to imagine how technology might develop, is to buy Altera in a $54-a-share deal that will combine two Californian companies with very different strengths. The latest Wall Street mega deal follows a record May in which $243 billion worth of mergers and acquistions took place according to Dealogic.
Intel makes PC chips and sells most of those used in servers, while Altera specialises in field-programmable gate array chips that are used in mobile devices and cars.
Brian Krzanich, Intel’s chief executive, denied that the deal, which has been approved by both boards and is expected to close in six to nine months, was a defensive play at a time of slowing growth in demand for personal computers. In March, the company slashed nearly $1 billion from its first-quarter revenue forecast and said that small businesses were delaying upgrading their computers. Thanks a lot for stopping by. Before we carry on I needed to thank http://thesmiddyhouse.co.uk/ for their continued support and the support of their network. Having a support team like this means a lot to us as we continue to grow our personal blog.
Mr Krzanich said that the deal would enable the company to develop products that were faster and highly customisable and that would integrate Intel’s Xeon processors with Altera’s products.
In the case of facial recognition software, Intel said it hoped that the integration of the companies’ technology would enable it to put search algorithms directly on to the chip for the first time — a move that will speed up results.
“These are products that our customers want built,” Mr Krzanich said, adding that the new products also would serve the data centre market and household devices that are connected online.
In addition, Intel wants to develop programmable chips for driverless cars that would enable vehicle manufacturers to update algorithms in real time. “They can continue to make improvements in the safety and quality of the vehicle,” Mr Krzanich said.
Intel will finance the deal through a combination of cash and debt and said that it expected to generate free cashflow within a year of its completion.
The acquisition is the latest in a string of deals this year in the chip industry. Last week Broadcom, another American company, was bought by Avago, of Singapore, for $37 billion. NXP Semiconductors, a Dutch company, is buying Freescale, based in Austin, Texas, in an $11.8 billion transaction.
Mr Krzanich said that he expected growth into new products to account for 60 per cent of the value created from the acquisition, with cost savings driving the remaining 40 per cent of the deal’s value.
Altera’s shares, which closed at $48.85 on Friday, rose by 6.1 per cent to $51.84 in early trading. Intel shares fell 1.3 per cent to $34.