Intel has raised its debt levels by $8 billion to $20 billion to accommodate the $16.7 billion acquisition of the data center chip outfit Altera, says a report from The Register. The chip maker did hint at bumping up debt levels during its third quarter conference call.
Inter making preparations to conclude Altera deal
“Our net cash balance, total cash less debt, and inclusive of our other longer term investments, is approximately $5.1bn. Over the next two quarters, we expect to complete the acquisition of Altera,” CFO Stacy Smith said.
Intel signed an acquisition deal with Altera a few months ago to foray into the growing Internet of Things market and boost its presence in the data center segment. With such moves, the chip maker hopes to lower its dependence on the ever-shrinking PC market.
Though the revenue for Intel’s data center group improved to $4.1 billion, up 12% from last year, the overall estimate for the segment has been lowered. The chip maker expects the data center business to grow in the low double digits compared to the earlier estimate of around 15% growth.
For the last quarter, Intel reported revenue of $14.5 billion and net income of $3.1 billion, which is down 6% from the same period last year.
EC clears Intel-Altera deal
Separately, the European Commission (EC) has given its approval to the Intel-Altera acquisition. EC competition commissioner Margrethe Vestager said the approval shows that important deals can be approved swiftly, provided there are no “competition concerns.”
“I am glad that we can approve this transaction, which shows that multibillion euro deals in complex industries can be cleared unconditionally after an initial investigation,” Vestager said. EC had made sure the deal won’t be against the overall market as the companies have no significant overlap in the products they offer.
Intel, which generates around $2 billion in revenues from other segments of the market, could benefit immensely from the Altera acquisition.
“Intel supplies a host of integrated chip solutions to many markets beyond computers, and it is in many of these markets that Intel has the most potential for continued growth,” notes Tom Hackenberg, principal analyst at IHS.
This year has seen some major deals involving chip makers, including the Intel- Altera deal. Other major deals were Avago paying $37 billion for Broadcom and NXP acquiring Freescale for $11.8 billion.