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On Monday, Baird reaffirmed a Neutral rating and a $20.00 price target for Intel Corporation (NASDAQ:INTC), following the company’s announcement of a deal to sell a majority stake in its subsidiary, Altera. Intel, currently trading at $20.81 and showing signs of slight undervaluation according to InvestingPro’s Fair Value model, disclosed this morning that it has entered into a definitive agreement to sell 51% of Altera to private equity firm Silver Lake, placing a valuation on Altera at approximately $8.75 billion, which equates to 5.7 times its projected 2024 revenue.
Intel will maintain a 49% stake in Altera. Raghib Hussain is set to take over as CEO of Altera, succeeding Sandra Riveria, starting May 5, 2025. Hussain has a background as President of Products and Technology at Marvell (NASDAQ:MRVL). The transaction is slated for completion in the second half of 2025.
Altera, which specializes in field-programmable gate array (FPGA) technology, reported revenues of $1.54 billion in 2024. The company also posted a non-GAAP gross margin of 49.9% and a non-GAAP operating margin of 0.23%. This transaction comes as Intel, with a market capitalization of $90.57 billion and annual revenue of $53.1 billion, faces challenges with cash burn and profitability, according to InvestingPro analysis. Intel’s decision to divest a portion of Altera closes a chapter that began with its acquisition of Altera for $16.7 billion in December 2015.
The sale comes after a period of challenges for Intel’s FPGA aspirations in the data center space. Notably, Microsoft (NASDAQ:MSFT) had indicated by December 2019 that FPGAs were not living up to expectations for data center acceleration, losing ground to GPUs and CUDA technology. Additionally, Altera’s manufacturing, which was initially expected to be handled by Intel post-acquisition, reverted to TSMC, contributing to rival Xilinx (NASDAQ:XLNX) gaining market share.
Despite these setbacks, Baird analysts see potential for Altera to rebuild its market share in the medium term, particularly in high-end FPGA densities. While Altera’s previous attempts to expand into the mid-range market have been unsuccessful, there is anticipation of opportunities in high-end applications such as AI custom ASIC emulation, advanced driver-assistance systems (ADAS), and industrial uses. With Intel’s next earnings report due on April 24, 2025, investors can access comprehensive analysis and additional insights through InvestingPro’s detailed Research Report, which covers key metrics and growth prospects for this semiconductor giant. This is in contrast to Xilinx’s 2020 revenue breakdown, which showed a heavy reliance on aerospace, defense, and industrial sectors, comprising 45% of its revenue.
In other recent news, Intel Corporation announced the sale of a 51% stake in its Altera business to Silver Lake, valuing Altera at $8.75 billion. This strategic move allows Intel to focus on its primary operations while retaining a 49% interest in Altera. Additionally, Intel plans to deconsolidate Altera’s financial results from its statements, with Altera reporting revenues of $1.54 billion and a non-GAAP operating income of $35 million for Fiscal Year 2024. Meanwhile, KeyBanc Capital Markets maintained a Sector Weight rating on Intel, noting mixed signals in the company’s market position. Intel’s advancements in its 18A node technology and gains in the Cloud and AI segment were highlighted, but aggressive price cuts for its CPUs could limit gross margin recovery.
Texas Instruments (NASDAQ:TXN), facing challenges due to new tariff regulations from China, saw its stock react to concerns over potential disruptions in operations and sales. The China Semiconductor Industry Association’s notice regarding the origin of chip imports could impact companies like Texas Instruments and Intel, which have U.S.-based fabrication plants. Stifel analysts have identified Texas Instruments and Analog Devices (NASDAQ:ADI) as top picks in the semiconductor sector, citing their historical resilience during economic downturns. However, Stifel also adjusted estimates downward for Intel, reflecting anticipated challenges from tariffs and potential economic slowdowns.
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