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Intel Acquisition of Altera: the Worth of Rumors

Gabe Moretti, Senior Editor

In the last two weeks John Cooley, the owner of the Deep Chip column. has spent a significant amount of words commenting on the Wall Street Journal story regarding the offering by Intel to acquire Altera.  At the end of the two weeks I have learned a full list of short term negative events possible that can result from an acquisition, thanks to John.  I also learned from the usual anonymous contributor that at least two projects using FPGA devices to increase search speed in a data center did not meet expected goals.  This second contribution was in response to the reason the Wall Street article gave for Intel’s interest in Altera.  The writer of the Deep Chip piece, who signs himself or herself “Been There, Done That” states that the main reason for Intel acquisition is the market expansion in FPGA due to the need to use FPGA devices in data centers to increase search speed.

By the way, I really wish John would rely less on these anonymous contributions because more frequently than is comfortable, such pieces end up having ulterior motives.  “Caveat lector” reader beware, is the approach to be taken with these contributions.   The anonymous contribution published this week regarding the supposed technological reason for the acquisition of Altera by Intel is particularly off the mark.

“Been There, Done That” starts from a premise that is hardly defendable.  In my job I talk to both financial analysts and editors.  We all know the names of the few analysts that truly follow our industry: none of them is connected with this particular story.  Generally financial editors have only a superficial knowledge of the industry in general. The Deep Chip contributor took the Wall Street explanation for the acquisition as a real reason for such move.  Wrong, really wrong.  Contrary to the Wall Street editor, Intel has people that do not just rely on a Google search to find out the potential of the acquisition, both from a technological and a financial point of view.  FPGA in the data center is likely to have been a topic found with a Google search, knowing how good Intel is at pointing the financial community in the wrong direction when they want.  I can assure you that the real reason for the acquisition, if the acquisition will indeed take place, may never be known.  Reasons will be given, but the real, fundamental one, may never be known outside a small group at Intel.  Please do not be so naïve to assume that every acquisition offer has the goal to actually end up in an acquisition.  Do you remember how much money Carl Icahn made with is “failed” acquisition of Mentor by Cadence?

The anonymous Deep Chip contributor uses a published paper from Microsoft personnel that stated that their project of using FPGA devices to increase search speed only doubled the speed. “Been There, Done That” states that “my engineers and I” have identified 14 failures in such an approach.  The best I can deduct is that that particular engineering team has also used FPGAs in an attempt to increase the search speed of a system and found that an ASIC solution worked better in their particular case.  I ask myself why an entire engineering team has the time to analyze a Wall Street article instead of doing productive work?  Is it to derail the acquisition or to ridicule Intel or may be the Wall Street Journal?

The stated reasons for the projected failure of the acquisition rests on one Microsoft project and the experience of another engineering team.  I am sure that the writer is extremely familiar with the project he or she led, but probably not intimately familiar with the purpose of the Microsoft project.  Sometimes collateral results are as or more important than the stated purpose of the project.  Let me point out that the Microsoft project was not meant to deliver a sellable product and that it may have been only one of a number of parallel projects.

So “Been There, Done That” fails to prove that the assumed technical reason for the acquisition is misguided, since it is likely that the reason does not exist.  Unless, of course, he or she works for Intel.  In which case good luck hiding under a pseudonym.  I do not presume to know the reason or reasons Intel has to acquire Altera but I can point out that the FPGA market is healthy and likely to grow, that there might be technological synergy between FPGA and IC engineering (in either or both directions), and that it may be more efficient to acquire experienced human resources through an acquisition than in the open market.

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