Microchip manufacturer and technology industry giant Intel Corporation announced June 1 that it would purchase Altera Corporation for $16.7 billion. The goal of the acquisition is to expand Intel's data center offerings. There is pressure from Web service players like Google and Facebook, because these companies already operate their own data centers – Intel wants to make sure they don't start making their own chips as well.
Altera is a leading producer of field programmable gate arrays, which means the chips' programming can be changed after they have been installed in end-user devices. Intel plans to combine its chips with Altera's programmable chips in order to offer them to global data centers. One of Altera's clients is Microsoft, which will utilize FPGAs in its new Iowa data center, which is currently under construction.
With the acquisition, Intel is attempting to offset growth and rising costs.
"Management teams are looking at their business and predicting little growth going forward," said Gus Richard, an analyst at Northland Securities Inc. "The M&A wave is a function of them trying to drive earning growth. Intel's purchase of Altera is one of the few strategic moves that is being made currently."
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