Intel stock moved to green yesterday after reports that the $16.7 billion Altera deal has been approved by the Department of Justice. The deal got approval without a request for more details, said the New York Post, citing sources aware of the matter.
Deal still needs clearance from Europe, China
Intel’s data center segment is showing impressive potential, and now accounts for 40% of the company’s earnings. “Intel might be making the acquisition in this related chip area to limit competition. That has led to speculation the merger could face regulatory scrutiny,” says the report. Of note, even after the approval from Department of Justice, the deal still needs to be cleared by European and Chinese regulators.
Michael Mauboussin: Challenges and Opportunities in Active Management And Using BAIT #MICUS
Michael Mauboussin's notes from his presentation at the 2020 Morningstar Investment Conference, held on September 16th and 17th. Q2 2020 hedge fund letters, conferences and more Michael Mauboussin: Challenges and Opportunities in Active Management Michael Mauboussin is Head of Consilient Research at Counterpoint Global in New York. Previously, he was Director of Research BlueMountain Capital, Read More
In June this year, the chip announced plans to acquire Altera for $54 per share, in a deal valued at $16.7 billion. This will be Intel’s biggest acquisition to date, and will help the chip maker to offer twice the computing power with its Xeon processors.
With uncertainly in the PC segment, and lack of growth in the smartphones, high-end server chips becomes the only viable option for Intel to boost revenues. The move from Intel, which already dominates the datacentre market, comes at an apt time as rivals like Qualcomm and Avago Technologies are also targeting the datacentre market.
“Intel will be the only company that will be able to combine x86 server CPUs with FPGAs onto a single die. This could eventually be a US$1 bil (RM3.70 bil) market, with the lion’s share going to Intel,” Reuters said previously.
Intel downgraded to hold
Separately, in a report on Tuesday, analysts at Vetr downgraded the chip maker from Buy to a Hold. They now have a $30.52 price target on the stock. In a note on August 31, Northland Securities upgraded the stock to Outperform from Market Perform.
Zacks research analysts have a short-term rating of Hold on Intel. Of the thirty analysts covering the chip maker, sixteen have a Strong Buy on the stock, two see it as a Buy, eight rate it a Hold, and three believe it to be Strong Sell while one sees it as a Sell.
As of around 11 am EDT Wednesday, Intel shares were down 0.08% at $29.48. Year to date, the stock is down almost 20% while over the last year, it is down over 15%.