( ESNUG 548 Item 2 ) -------------------------------------------- [04/03/15]
Subject: 12 stakeholders who fear Intel-Altera merger -- and 6 who want it
SHOCK BUT NO AWE: Last Friday the Wall Street Journal caught the chip world
by surpise when it said Intel was in talks to buy Altera.
ALTR's market cap was $10.4 billion early Friday when the story first broke.
Then investors bid up ALTR to end Friday with a market cap of $13.4 billion.
At first it seemed like everyone loved the idea! But after a few days, the
enthusiam wore off when a number of stakeholders slowly realized that this
Intel-Altera merger might not be such a good idea. Here's who loses:
- Altera middle management. The day the deal closes, Intel will
send their beancounters in to slash Altera's middle managers; to
"cut costs" and "build efficiencies". They'll be the "expensive"
10 to 20 year guys who made Altera successful that the INTC troops
will be cutting, but hey -- it's business! "We'll use our own
Intel people to replace them. They know The Intel Way."
- Altera employees. Intel will also cut the veteran Altera sales,
marketing, PR, and other "non-essential personnel" who aren't
irreplaceable direct FPGA R&D and/or tech support engineers.
We gotta cut costs! It's business! "And anyway, our own loyal
Intel people can easily replace these functions."
- Xilinx managment. In case you haven't noticed, Xilinx has been
in trouble over the past 12 months. Even CNBC's Jim Cramer gave
Moshe Gavrielov merciless crap for XLNX's 07/22 low sales:
(click pic for Cramer skewering Moshe interview.)
Brutal interview where Cramer repeatedly doubts Moshe. XLNX down
14% in one day. Cramer furious his charitible trust bought XLNX.
Now XLNX missed estimates for last 3 quarters. Investors pissed!
XLNX FY'14 ended 3/31/15. The fear is a bad overall XLNX FY'14.
So if Altera goes, it puts MASSIVE IMMEDIATE PRESSURE on Xilinx
management to sell XLNX to someone -- and at a wounded price all
because they failed to turn the company around.
- Xilinx employees. Whoever buys Xilinx will lay off thousands to
to "cut costs" and "build efficiencies". It's business!
- Xilinx investors. Intel is a HUGE user of Xilinx FPGAs. Xilinx
will lose this business over time. In many US territories, Intel
is the largest customer of Xilinx FPGAs. That all slowly ends if
Intel buys Altera.
- FPGA users. Instability in the overall FPGA market (like when two
biggest players are in chaos) means R&D on the advanced FPGAs is
cut; and the prices for current FPGAs go up. (It's economics.)
- Intel sales staff. To make up for all those Altera cost cutting
layoffs, the Intel sales guys will now have to sell something
they have zero knowledge off -- high end FPGA's! ("HELP!")
- ARM Holdings, Plc. If Altera goes to Intel, that means the Intel
bosses will want 32-bit and 64-bit Intel Atom CPU's to directly
replace all those equivalent ARM cores in the Altera line. This
is bad news for the ARM folks.
- Intel Custom Foundry (ICF). Tabula failed. Achronix is still
unknown. Altera is one of the few remaining ICF customers.
If Intel buys Altera it continues to show how ICF can't get real
live external customers. "Is it really 'sales' if you're paying
$13 billion Intel dollars for IDF 'sales'?"
- Wall Street Analysts. The non-merger Wall Street guys disagree
with the Intel-Altera merger because Altera's share price is too
high right now. INTC paying $13 billion for ALTR's $2 billion
boost in annual revenue doesn't make much financial sense. And
nobody sees any synergies which would increase that $2 billion.
- TSMC/Samsung/GlobalFoundries. A wounded XLNX hurts fab orders.
(And Xilinx is a big fab order!)
Worst still, losing all those future Altera manufacturing orders
over to the Intel 14/10nm fabs hurts TSMC/Samsung/GF even more.
- Broadcom.
"Altera, along with Broadcom, has long been considered
a likely acquisition target for Intel."
- Ross Seymore, Deutsche Bank (03/27/15)
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And the 7 who want the Intel-Altera acquisation to come through:
- Atmel, Lattice, Microsemi. "No more Xilinx-Altera duopoly!"
- AMD. "Anything that messes up my rival is good news for me."
- FPGA users. "No more Xilinx-Altera duopoly in FPGA's!"
- Wall Street M&A houses. "We don't care who merges with whom
as long as we get the hefty million dollar merging fees. If
you can cook up a rationalization that the street buys into
for this merger, we'd be mighty appreciative."
- Qualcomm. It's no secret that Qualcomm wants to design server
chips now to get into the booming data center market.
"It will take us awhile to build this business, but we
think it's an interesting business."
- Steve Mollenkopf, QCOM CEO (Barron's 11/19/14)
Wall St. Analyst Patrick Moorhead cited that IBM and Qualcomm
were two potential buyers of Xilinx. Owning Xilinx would help
Qualcomm in the server chip business -- and with $18 billion in
cash, it would be easy for Qualcomm to snap them up.
And the 6th stakerholder who really, really, REALLY wants this INTC/ALTR to
come through? Altera's upper management. It's been my experience that the
upper management of any acquired-for-$13-billion company tends to walk away
with massive WE'RE-SOOO-SET-FOR-LIFE multi-million dollar golden parachutes.
"It's the American Dream! It's the ultimate exit strategy, baby!!!"
- John Cooley
DeepChip.com Holliston, MA
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