Wall Street's Early Reaction To The Intel-Altera Deal

Intel Corporation INTC on Monday announced it will acquire Altera Corporation ALTR for $16.7 billion or $54 per share. By mid-afternoon, three of Wall Street's top analysts weighed in on the deal.

Topeka: ‘Compelling' Synergies And New Product Opportunities

Suji Desilva commented in a note that the acquisition will create an "attractive" combined data center and Internet of Things (IoT) product portfolio.

The analyst further suggested that Intel post-acquisition can realize "significant" product synergies as well as cost and manufacturing synergies from Altera's business.

Deutsche Bank: Good Strategic Fit But At ‘Surprisingly High' Price

Ross Seymore commented in a note that Intel will benefit from an integrated and customized Xeon+FPGA solutions in the data center and for IoT applications with co-packaged products expected in the second half of 2016.

Related Link: Why Intel Needed To Buy Altera

The analyst said Intel's acquisition is a "good" and "solid" strategic fit, but the combined company's value-creation appears to be more revenue synergy-driven compared to recent deals in the sector.

Intel assumed a 7 percent revenue compounded annual growth rate for Altera (compared to the analyst's 4 percent estimate). As such, the deal could create investor valuation concerns as the deal is an approximate 55 percent premium to Altera's share prices at the end of March, against the approximate 35 percent average premium for semi deals in the past few years.

Finally, Seymore estimated the deal to be approximately 3 percent accretive in 2016 (assuming part of the deal is funded in debt and the buyback pace remains unchanged) but can be "meaningfully" less than if Intel had used the same amount to repurchase its shares.

Overall, the acquisition could be summed up as a "tuck-in" from Intel's perspective, and investor focus will return to the company's core business which is expected to show some signs of improvements in the bottom half of 2015.

JP Morgan: Acquisition Provides Expansive Plays In The Data Center, IoT Markets

Harlan Sur commented in a note that Altera will provide Intel with expansive opportunities in the data center and IoT markets, as fully integrated processors with FPGAs at leading-edge nodes bring "significant" performance enhancements, cost reductions, and greater flexibility.

Within the $37 billion data center market, Intel expects to move as much as one-third of the workloads in the cloud down to fully monolithic server processors with FPGAs by 2020. For the IoT market, the company expects FPGAs to compete "aggressively" with existing ASIC and ASSP solutions in the industrial automation segment and for automotive applications.