SANTA CLARA — Negotiations have ended in Intel’s rumored plan to buy Silicon Valley memory chipmaker Altera after the two companies failed to agree on price, according to a report Thursday.
An Intel spokesman said the Santa Clara company had no comment on the report by Bloomberg News that Altera had rejected an offer of about $54 a share, a premium about 28 percent above Altera’s current price.
Altera’s stock fell on the report, but quickly rebounded and closed at $43.33, up 3.17 percent. Altera had no comment on the reported negotiations.
“There’s a good chance investors are going to be very vocal,” said Doug Freedman, an analyst with RBC Capital Markets.
“They’re going to ask a lot of questions of existing management about what type of plan they have to make the stock value at or above what was being offered,” he said.
Freedman said Altera’s stock has hovered between $32 and $38 a share “for the better part of five years.” It closed at $34.27 March 26, the day before the negotations with Intel were reported. The following day, it closed at $44.39.
The report of failed negotiations triggered speculation that Intel might turn toward Broadcom as its next acquisition target, sending that chipmaker’s shares up more than 2 percent in trading Thursday.
Mark Hung, an industry analyst with Gartner, said buying Broadcom makes more sense than Altera but would be costly, and would most likely involve a combination of cash and stock.
Santa Clara-based Broadcom has a market value of $26.3 billion, compared with Altera’s $13 billion.
“But I don’t know how Altera cannot accept that offer” from Intel, Hung said.
Intel is looking for acquisitions because it wants to grow its network equipment business, Hung said. “Altera has half its revenues in network equipment sales, but if you really want to get into network infrastructure, Broadcom would be a much better buy than Altera. “
Altera, based in San Jose, makes a versatile type of logic chip that is reprogrammable by its users. There has been an expanding market for this type of chip, which is taking on more data center chores that were once assigned to the processors Intel makes.
The deal was seen as a “win-win” by some analysts when it was first reported two weeks ago, but questioned by others.
Intel foundries already make several Altera chips. A deal would allow Intel to increase the utilization of their chip factories and sell to customers that are using Altera’s products around Intel’s own chips, chip analyst Jack Gold noted recently.
There’s also a strategic element to acquiring Altera, thus keeping it out of the hands of competitors like Qualcomm and ARM.
But analyst Stacy Rasgon, a semiconductor analyst with Bernstein, said when the proposed deal was first reported that it would be “very expensive” for Intel with a small or no upside. “They would be spending money they don’t have.”
Contact Pete Carey at 408-920-5419. Follow him at Twitter.com/petecarey.
