Intel to sell majority stake in Altera for $4.46 billion to fund revival effort

By Arsheeya Bajwa

(Reuters) -Intel has agreed to sell a 51% stake in its Altera programmable chip business to buyout firm Silver Lake for $4.46 billion, in the first major move by new CEO Lip-Bu Tan to revive the struggling American chipmaker.

Monday's deal values Altera at just $8.75 billion compared to the nearly $17 billion Intel paid in 2015, but the sale will provide the company much-needed cash after hefty bets on contract manufacturing by former CEO Pat Gelsinger strained its finances.

Shedding assets, including Intel's stake in Altera, is at the center of Tan's strategy to streamline the chipmaker after predecessors failed to diversify beyond its mainstay PC and server chip business for years.

The leadership missteps have left Intel struggling to gain a footing in the AI industry dominated by Nvidia, while rival AMD threatens its stronghold of the central processor market.

"Today's announcement reflects our commitment to sharpening our focus, lowering our expense structure and strengthening our balance sheet," said Tan, who took the helm after Gelsinger's ouster in December.

Intel shares were up 2.8% in afternoon trading.

Since last year, Intel has taken steps to spin out Altera, which makes programmable chips that can be used for various purposes in industries ranging from telecom to the military.

The deal is expected to close in the second half of 2025, after which Intel expects to deconsolidate Altera's financial results from its own.

Raghib Hussain, a former executive at custom AI chipmaker Marvell, will succeed Sandra Rivera as Altera CEO from May 5.

CORE BUSINESS FOCUS

Altera posted revenue of $1.54 billion in 2024, a mere 3% of Intel's total sales, and an operating loss of $615 million.

After acquiring the company, Intel had planned to shift Altera's chip production in-house from Taiwan's TSMC, which was beginning to pull ahead.

But the long and costly transition eroded Altera's market share, allowing rival Xilinx, which was later bought by AMD, to gain ground.

"The divestiture of Altera is at a market down-cycle and at the bottom of Altera's sales performance. It is not the best time to sell Altera's stake," said Hendi Susanto, a portfolio manager at Gabelli Funds which holds Intel shares.

"Some investors may see the transaction more positively in terms of Intel strengthening its focus on its core businesses."

Reuters had first reported in November Silver Lake was among potential suitors competing for a stake in Altera.

Bob O'Donnell, chief analyst at Technalysis Research, said he expects to see Intel divest more assets.

Self-driving tech firm Mobileye Global, in which Intel holds a majority stake, is considered to be among its "non-core" assets.

CFO David Zinsner had indicated at a conference in December that Intel could sell some of its position in Mobileye over time, saying the chipmaker could "use the cash".

(Reporting by Zaheer Kachwala and Arsheeya Bajwa in Bengaluru; Editing by Arun Koyyur)