The private equity firm Silver Lake Partners LP is reportedly in advanced talks to purchase a majority stake in Intel Corp.’s programmable chip business unit, Altera. Silver Lake has emerged successful over other potential buyers and is currently finalizing the transaction details.
Silver Lake in talks to acquire Intel’s Altera unit
According to an exclusive report from Bloomberg, the negotiations are at an advanced stage, although the exact size of Silver Lake’s stake and the timeline for an official announcement remain unclear. The talks could still experience delays or may not lead to a deal.
Neither Silver Lake nor Intel have commented on the report. Altera specializes in field-programmable gate arrays (FPGAs), which are programmable chips efficient for specific workloads, such as artificial intelligence, network devices, and industrial equipment.
Silver Lake was reportedly in competition with other private equity firms, including Bain Capital LLC and Francisco Partners LLC, for Altera. The firm has substantial experience in the technology sector, having been involved in notable deals with companies like Dell Technologies Inc., Qualtrics International Inc., and Alibaba Group Holdings Ltd. Silver Lake publicly expressed its interest in Altera as a potential acquisition target in January.
Intel acquired Altera for approximately $17 billion in 2015 and currently competes with Advanced Micro Devices Inc., which purchased FPGA chipmaker Xilinx Inc. for $49 billion in 2022.
The financial aspects of the potential deal have not been disclosed; however, a sale would provide Intel with a significant cash boost as it struggles with declining revenues amid heightened competition and a lack of traction in the AI chip market.
In response to its financial challenges, Intel has announced plans to spin off its manufacturing business to concentrate on chip design. This initiative follows the departure of former CEO Pat Gelsinger in December. The company is now under interim co-CEOs David Zinsner and Michelle Holthaus and is considering various cost-cutting measures, including divesting businesses like Altera and Intel Capital.
Under Gelsinger’s leadership, there were intentions to sell a minor stake in Altera and spin it off ahead of an initial public offering. It remains uncertain whether this plan is still in consideration alongside Silver Lake’s ongoing negotiations.
Recent reports indicate that rival chipmakers Broadcom and Taiwan Semiconductor Manufacturing Co. are also interested in acquiring parts of Intel’s business, which has contributed to a more than 16% increase in Intel’s stock following the news of these talks. The stock is up 29% year-to-date, having previously lost more than 60% of its value in 2024.
Despite the ongoing discussions regarding a sale, analysts from TheCUBE, Dave Vellante and David Floyer, argue that retaining independence would be better for the U.S. technology industry. Instead, they suggest that Intel should consider selling off its foundry business and focus on chip design.
Intel’s fourth-quarter earnings exceeded Wall Street expectations, although projections for the current quarter fell short due to sluggish demand for data center chips. The search for a permanent replacement for Gelsinger continues.
Spoiler reports indicate that Altera has attracted interest from semiconductor firms Lattice Semiconductor Corp. and various buyout firms, emphasizing the competitive landscape surrounding this potential acquisition.
So what?
- If the sale goes through, it would provide Intel with much-needed capital at a time when the company is restructuring and refocusing on chip design. Intel has struggled with declining revenues and the increasing dominance of AI chipmakers like Nvidia and AMD.
- Intel acquired Altera in 2015 for $17 billion to compete with Xilinx (now owned by AMD), but it has struggled to keep pace. If Intel exits the FPGA space, it would effectively concede this market to AMD and other players like Lattice Semiconductor, narrowing its focus on core processor and AI chip development.
- Intel’s stock has already surged following reports of a potential breakup involving Broadcom and TSMC. If the Altera deal materializes, it could further fuel investor optimism, but there’s also potential for volatility depending on market reaction to Intel’s evolving business model.
- Altera’s field-programmable gate arrays (FPGAs) are widely used in AI, networking, and industrial applications. With the AI boom driving demand for specialized chips, Silver Lake’s move suggests confidence in FPGA growth.
- Silver Lake has a history of high-profile tech investments, including Dell and Alibaba. Acquiring Altera would mark a significant step into semiconductor hardware, an industry that has traditionally been dominated by corporate acquisitions rather than private equity.
- If Silver Lake takes over Altera, it could restructure the business and later take it public or sell it at a higher valuation, following a pattern seen in other private equity-led tech acquisitions.
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Featured image credit: Intel
