Intel is selling its controlling stake in FPGA maker Altera to private equity firm Silver Lake, a move which brings to a conclusion months of rumors and speculation about what Intel would do with Altera, a company it acquired in 2015 and spun out as a fully-owned but otherwise independently operating firm at the beginning of this year.
Specifically, Intel is selling 51% of Altera for roughly $4.46 billion in a deal that values the full company at around $8.75 billion, a far cry from the $16.7 billion Intel paid for Altera 10 years ago in what remains the largest acquisition in the history of the company. Also, Altera is replacing Sandra Rivera, who had guided the company as CEO through its lengthy process of transforming from Intel’s Programmable Solutions Group into a newly-independent company. Raghib Hussain, formerly president of products and technologies at Marvell, will take over as CEO of Altera effective May 5.
The sale itself comes as no surprise, as Intel had been rumored for months to be talking to a variety of parties–ranging from investment firms like Silver Lake to fellow chip firms like Marvell and Lattice Semiconductor–about investing in Altera. The reports of a potential deal with Silver Lake began to gain more steam about a month ago.
Jack Gold, president and principal analyst at J. Gold Associates, told Fierce Electronics, “Altera really isn’t strategic to Intel going forward so spinning them out made sense. At this point, I believe Intel is trying to raise as much capital as it can in the short term to invest in its new products and facilities, so selling them rather than waiting for the IPO round to happen later on makes sense for them.”
Not long after Pat Gelsigner was ousted from the CEO job at Intel last summer, the company was thought to be interested primarily in selling a minority stake–not majority control–in Altera and keeping the company on a path toward an IPO, as Gold mentioned. As CEO, Rivera had long insisted that Intel had firm plans for an IPO even with an impending sale of part of its stake. The dynamics behind Intel’s sale plans may have changed with the appointment of Lip Bu Tan as CEO last month, and it remains to be seen if or when Altera could still pursue the IPO.
“I do think eventually Altera will have to do an IPO so Silverlake can get its investment back, but they could also sell them to another entity who would value the FPGA capabilities that Altera brings,” Gold observed.
It was not completely clear from Intel’s press release announcing the Altera sale if Rivera is leaving Altera entirely, but her replacement could be seen as unexpected, given that she was publicly discussing her plans for Altera’s technology roadmap as recently as last month. Gold speculated Rivera, a 25-year Intel employee, may not have been happy with how the sale played out, although the change in leadership also could be read as a decision by Tan or Silver Lake. As of Monday morning, Hussaing was still listed as part of Marvell's leadership team on the company's website.
The deal will close later this year, and Intel will continue as a foundry partner to Altera.
“Today’s announcement reflects our commitment to sharpening our focus, lowering our expense structure and strengthening our balance sheet,” said Tan, in a statement. “Altera continues to make progress repositioning its product portfolio to participate in the fastest growing and most profitable segments of the FPGA market. We are grateful for Sandra’s strong leadership and lasting impact throughout her 25-year Intel career and wish her continued success as she begins a new chapter. Raghib is a superb executive we selected to lead the business forward based on his vast industry experience and proven track record of success. 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.”
Kenneth Hao, chairman and managing partner of Silver Lake, added, “Together with Raghib, we will be focused on strengthening Altera’s technology leadership position and investing in emerging AI-driven markets such as edge computing and robotics. We look forward to working closely with Intel as a strategic partner who will continue to provide U.S.-based foundry services and complementary engagement with customers.”