TLDR
- Intel sells 51% of Altera to Silver Lake, valuing the unit at $8.75 billion
- Intel will retain a 49% stake and receive $3.4 billion in cash
- Altera to focus on high-growth AI and edge computing sectors under new leadership
- Intel faces financial pressure with a -$18.76 billion net loss in the past year
- Stock underperforms S&P 500 despite a 44.12% 1-year gain
Intel Corporation (NASDAQ: INTC) has agreed to sell a 51% majority stake in its programmable chip subsidiary, Altera, to private equity firm Silver Lake. The deal values Altera at $8.75 billion, marking a major shift in Intel’s ongoing realignment strategy.
The move will bring $3.4 billion in cash to Intel, as it aims to refocus efforts on its core semiconductor operations. Intel will retain a 49% ownership interest and continue collaborating with Altera on foundry services and customer engagement.
Altera was relaunched as a standalone FPGA (field-programmable gate array) company in 2024. It provides critical chip solutions for sectors such as communications, aerospace, defense, and increasingly, AI and robotics.
Leadership and Growth Ambitions at Altera
In conjunction with the deal, Altera will see a change in leadership. Raghib Hussain, previously with Marvell as President of Products and Technologies, will take over as CEO starting May 5, 2025. He replaces Sandra Rivera.
Silver Lake’s Chairman Kenneth Hao described Altera as a “once-in-a-generation opportunity” to invest in advanced semiconductors. He emphasized Altera’s role in developing AI-focused technologies, particularly in edge computing and robotics.
With a consortium of major banks providing $2 billion in debt funding to Silver Lake, the transaction is expected to close in the second half of 2025, subject to regulatory approval and standard closing conditions.
Intel’s Financial Struggles Persist
Despite the high-profile divestiture, Intel’s recent financials reflect ongoing challenges. For the trailing twelve months, Intel posted a net income loss of $18.76 billion, a diluted EPS of -4.38, and a negative profit margin of -35.32%.
Levered free cash flow sits at -$13.2 billion, pointing to capital strain even with a cash reserve of $22.06 billion. With a debt-to-equity ratio of 48.28%, Intel remains under financial pressure to stabilize operations.
Return on equity and assets also paint a concerning picture, standing at -17.89% and -1.23% respectively. While Intel’s revenue totals $53.1 billion, the persistent losses suggest deeper structural issues in the business.
Mixed Performance in the Market
Despite financial headwinds, Intel has had some positive momentum in the market. Its stock is up 44.12% over the past year, outperforming the S&P 500’s 7.06%. Yet over the last five years, Intel has lagged, with a total return of 61.52% compared to the S&P’s 94.70%.
Year-to-date, INTC has barely moved, gaining just 0.15%. The stock’s current price of $20.08 is well below its 1-year target estimate of $22.80, signaling cautious optimism from analysts.
Investors remain split on the outlook. While the divestiture offers a short-term liquidity boost and allows Intel to prioritize core units like CPUs and AI processors, uncertainty looms over whether it can effectively execute its turnaround.
Strategic Investments Aim to Regain Edge
Intel continues to invest in next-generation products such as its Xeon 6 and Granite Rapids server chips, targeting the AI and cloud computing markets. These products are expected to help Intel regain ground lost to rivals like AMD and Nvidia.
The company is also benefiting from tariff exemptions that support U.S.-based tech manufacturers, potentially easing some cost pressures.
With earnings due April 24, 2025, markets will closely watch updates on product rollouts and the anticipated impact of the Altera divestiture on long-term revenue and profit margins.
