Intel, one of the world’s leading electronics giants, has acquired chip designer Altera. In the deal, which is reported to be worth approximately $16.7bn (£10.9bn), Intel will use the chips to widen the number of devices it powers, including smart cars and products within the cloud computing arena.
The latest deal is the largest acquisition in Intel’s 47-year history. In an industry where cost cutting is a key priority as sales continue to remain lacklustre, Intel’s move is savvy. With the sale of personal computers dwindling as customers turn to tablets and smartphones instead, companies such as Intel have to look to other revenue-making avenues.
A relationship between Altera and Intel already exists, with the electronics manufacturer utilising the chip company for several high-end products; however, Brian Krzanich, Intel’s chief executive, said that Intel will be able to completely integrate the chips into the design and production development by owning the company, which will lower costs whilst improving products.
Tony Cherin, one of San Diego State University’s finance professors, said: “Their PC chip business is going downhill, and so here's a way to bolster their earnings by getting into a different type of business.” He added that a plethora of deals in the chip industry could actually have a negative effect for consumers; for example, with smaller companies being acquired by industry leaders, competition could dwindle and ultimately make electronics more expensive.
Intel is currently the world’s largest PC chip manufacturer and it also dominates the server chip market; however, Gartner analyst Mark Hung expressed that Intel only has limited offerings of communication chips. These chips power data from mobile device to servers and this market is gaining thanks to the increased use of tablets and gadgets. By acquiring Altera, Intel has managed to strengthen its position in the server chip industry.
Patrick Moorhead, a tech analyst, explained that Altera’s chips can be configured for a variety of functions; in addition, they are ready for market far quicker than many of the traditional chips that Intel deals with. “What Intel is doing is finding ways to accelerate cloud applications. There wouldn't be a Facebook or Twitter or your smartphone without these monster data centres behind them,” Mr Moorhead added.
With the cloud computing market continuing to grow, it is unsurprising that third-party giants are taking notice. For Intel, the potential advantages of offering chips to help power the cloud could be enormous.
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