Intel may be talking with Altera about buying it out. Shares of both companies surged on the news, with Altera stock skyrocketing and climbing as much as 24.25% to as high as $42.96 per share and Intel stock surging as much as 6.3% to $31.98 per share.

Intel Corporation Said To Be Negotiating To Buy Altera

Details on the Intel – Altera talks

Dana Mattioli and Dana Cimilluca of The Wall Street Journal were the first to report the negotiations, citing sources familiar with the talks. If Intel and Altera seal a deal, then it would be Intel’s largest acquisition in its history. Before the news was reported, Altera had a market capitalization of about $10.4 billion.

The sources did not reveal any of the terms of the possible deal or its potential timing. And of course it is always possible that there will be no deal. Indeed, such an acquisition would be somewhat out of character for Intel, as usually it sticks with much smaller acquisitions. However, the company has made big acquisitions before, snapping up McAfee for $7.7 billion.

Intel needs to explore options

Earlier this week, it was reported that Samsung was eyeing a deal with AMD so that it could better compete with Intel in the chip making business. Such a combination would certainly prove dangerous for Intel, which has been already struggling due to declining PC demand, as a large portion of its earnings comes from chips for PCs. This month Intel trimmed almost $1 billion off of its revenue guidance for the first quarter, pushing it down to about $12.8 billion.

As far as acquisition targets go, Altera probably does look attractive to Intel. The company designs chips for cars, phone networks and other devices. Gobbling up Altera would make a lot of sense as Intel struggles to expand its operations and gain a foothold in chips for mobile devices.

Also The Wall Street Journal notes that Altera and Intel have worked together in the past. A couple of years ago, Altera started using Intel’s chip technology for its designs. The two companies struck a 12-year agreement with Intel agreeing to make Altera the only major programmable chip manufacturer that it would assist in building products.