Intel's $16.7M Altera Buyout to Boost 2016 EPS & Cash Flow

Intel Corp. INTC recently completed the Altera Corp. ALTR acquisition for $54 a share or a total of approximately $16.7 billion, per the deal announced in June.

On Dec 22, Intel received the regulatory approval from the Chinese Ministry of Commerce to buy the chipmaker specializing in programmable chips.

Altera will now operate as a new Intel business unit called the Programmable Solutions Group PSG under Altera veteran, Dan McNamara. The newly formed group will focus on strengthening the FPGA business, ARM-based SoC and power products. PSG will also develop new classes of products in the high-growth markets of data center and Internet of Things (IoT).

Moreover, Intel expects the deal to be accretive to earnings per share and free cash flow in the first full year after the close of the transaction.

Altera's programmable chips that can be configured by customers post purchase, will not only allow Intel to sell cheaper semi-custom-made chips, but also test the waters in the trending IoT space. Intel will continue to use the chips in cellular base stations and data centers for cloud computing.

Intel remains one of the largest semiconductor chipmakers in the world. The company's growth strategy is to utilize its core assets and move into profitable and complementary market segments. With cloud computing growing bigger each day, Intel's increasing demand for chips at data centers and other products outside the PC market is encouraging.

Currently, Intel carries a Zacks Rank #3 (Hold). A couple of technology stocks worth considering are NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy), and Texas Instruments Inc. TXN, carrying a Zacks Rank #2 (Buy).

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