Chipmaker Intel reportedly plans to sell its programmable chip unit Altera as part of an initiative to turn around its flagging operations. Marvell Technology is seen as a likely buyer. Intel stock and MRVL stock both declined on Tuesday.
On Monday, Reuters reported that Intel Chief Executive Patrick Gelsinger and other key executives are preparing to present to the board a plan to trim assets and reduce costs. Among the plans is the sale of its Altera unit, Reuters said.
Intel also is likely to further reduce its capital spending on factory expansion. It might even decide to scrap its planned $32 billion factory in Germany, a project that has reportedly been delayed, Reuters said.
The plan does not include a proposal to split Intel and sell off its contract manufacturing operation, or foundry business, Reuters said. Bloomberg reported last week that the split was possible, but analysts have dismissed that move as highly unlikely.
MRVL Stock: Marvell Could Make Play For Altera
On the stock market today, Intel stock declined 8.8% to close at 20.10. Meanwhile, MRVL stock sank 8.2% to close at 70.02. Chip stocks broadly fell on Tuesday. The Philadelphia semiconductor index, known as SOX, dropped 7.8%.
If Intel decides to sell its Altera business, Marvell is likely to make a bid for it, analysts say. However, the possible acquisition comes with pros and cons, Raymond James analyst Srini Pajjuri said in a client note Monday.
"From a strategic standpoint, a potential acquisition would help Marvell diversify into industrial/defense markets and beef up its already strong presence in telco and data center markets," Pajjuri said. "Higher gross margins associated with FPGA (field-programmable gate array) products would also be attractive to Marvell, especially as AI custom silicon becomes a larger portion of its revenues."
On the negative side, the FPGA chip market is expected to grow at a slower pace than Marvell's other businesses.
Also, the deal likely will require China regulatory approval, which could be a challenge, Pajjuri said.
Intel bought Altera for $16.7 billion in 2015. Its current market value is about $20 billion, Pajjuri said.
Pajjuri rates Intel stock as market perform. He rates MRVL stock as outperform with a price target of 90.
IBD Stock Ratings For Intel, Marvell
Intel ranks No. 17 out of 32 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has a lowly IBD Composite Rating of 11 out of 99.
On Aug. 1, Intel badly missed Wall Street's targets for the second quarter and with its guidance for the third quarter. The chip giant also announced a $10 billion cost-reduction plan and suspended its quarterly dividend. Intel stock plunged on the news.
Meanwhile, MRVL stock ranks 10th out of 39 stocks in IBD's fabless semiconductor industry group. Marvell stock has an IBD Composite Rating of 74.
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