According to CNBC, Intel (INTC 0.28%) and Altera (NASDAQ: ALTR)were unable to agree on a price for the reported acquisition of the latter by the former.
Intel is said to have made an offer "in the neighborhood of the low $50-range per share" -- talks had reportedly "taken place over several months."
Unable to agree on a price, it appears the companies have ceased negotiations with CNBC saying that the two companies "have not spoken in more than a week."
What does this mean for Altera?
If these reports are accurate, it seems that Altera management and the board of directors feel that the company could be worth more in the long run than what Intel reportedly offered.
For long-term investors, if the leadership is right, the offer rejection could be seen as bullish. After all, if the folks running the company think the stock is worth more than what Intel offered, then the shares might currently be undervalued relative to future prospects.
However, while the management and directors have significant insight into future prospects, they do not have a crystal ball. Many companies have rejected offers that turned out to be quite generous in hindsight.
That said, as of this writing, Altera shares are actually up from the closing price Thursday, which suggests investors seem to agree with the company -- Altera is worth more in the long run than what Intel offered.
What about Intel?
If Intel was really willing to pony up north of $15 billion to acquire Altera, this would imply that Intel is serious about getting programmable logic devices into its product portfolio.
In the field-programmable gate array market, Altera and Xilinx are the two major players. There are certainly some smaller FPGA vendors out there, but I think for what Intel would be interested in (bleeding-edge, high-performance FPGAs), acquiring Altera or Xilinx might have been the quickest way in.
However, I cannot help but think about the two smaller FPGA vendors Intel had forged foundry deals with: Achronix and Tabula. Tabula shut down last month, but Achronix still seems to be around.
One possibility for Intel, if it is really this set on selling FPGAs, is to acquire Achronix, and from that baseline, build up an FPGA effort. This would take a lot longer than buying one of the big fish like Altera or Xilinx, and Intel would effectively be in competition with both of these vendors.
However, if Altera will not sell at a price Intel is willing to pay, and if Intel really wants in on FPGAs beyond a foundry deal, then this might be the best course of action.
Keep an eye on the foundry deal between the two companies
On a related note, Intel is currently the manufacturing partner for upcoming high-end Altera Stratix 10 FPGAs. These chips will be built on Intel 14-nanometer technology.
What will be worth watching is what Altera does at the 10-nanometer technology generation. Paul McLellan, writing for SemiWiki, pointed out a very interesting snippet from the most recent Altera earnings call on that topic.
In particular, the CEO said that Altera is expecting to make a decision as to which company will build its 10-nanometer FPGAs by the end of the first calendar quarter.
The two companies in the running for this are Intel and TSMC. And given that we are now past the end of the first quarter, I would not be surprised if Altera announced its build partners for its next generation of high-end, 10-nanometer FPGAs on the April 23rd earnings call.
If Altera goes with Intel, then at the very least, Intel will continue to have exposure to high-end Altera FPGA sales. If the company goes with TSMC, then the situation could potentially get much trickier for Intel.
