Intel has announced the sale of a 51 percent stake in its programmable chip business, Altera, to the private equity firm Silver Lake for four point four six billion. This decision follows the company’s acquisition of Altera in 2015 for sixteen point seven billion dollars, with its current valuation having dropped nearly 50 percent to eight point seventy-five billion. Intel’s new CEO, Lip-Bu Tan, stated that this strategic investment aims to sharpen focus, reduce expenses, and strengthen the company’s balance sheet. Despite the sale, Intel will retain a forty-nine percent stake in Altera, which produces programmable chips for various sectors, including data centers and the automotive industry. This move is part of Intel’s effort to recover from a significant loss of sixteen point six billion in the third quarter of 2024, followed by a smaller loss of one hundred twenty-six million in the fourth quarter. Additionally, Raghib Hussain, formerly of Marvell, has been appointed as Altera’s new CEO, succeeding Sandra Rivera, who had a notable twenty-five-year career at Intel.
Why do we care?
Let’s not romanticize the spinout. Intel bought high and sold low—from $16.7B to a current valuation of $ 8.75B. That’s a write-down disguised as strategy. While the pivot allows for sharper focus, it also highlights how far behind Intel remains in crucial growth areas like AI-optimized silicon, where NVIDIA and AMD are significantly more agile.
Chips are interesting again, and not just for technical specifications. They’ve become political, with semiconductors being potentially tariffed more – I’ll hit on that shortly.
Intel is shedding what it cannot execute well. If Altera was under-leveraged, it’s reasonable to question how many other underperforming investments Intel may still be holding. Moreover, besides divesting from areas where Intel didn’t perform effectively, what can they successfully execute on?