Intel Corp (INTC)

[inex]

I don't think the Altera talks are about not being able to compete without buying the company, I believe that Intel has finally realized that the most profitable way to take advantage of the process lead that Intel enjoys is to outright purchase high margin chip companies and reap 100% of the benefit that companies gain from access to Intel's Foundry. Even if we assume a Purchase price of 20X earnings, if Intel can project a gradual doubling of income based upon access to smaller manufacturing nodes, that makes the company cheaper and is a better use of cash than stock buy backs which only net the 2-3% dividend. To me, this is a much smarter way to grow the company and leverage Intel's IP than anything else I can think of... In the case of Altera, it is also a way of capturing 100% of their chip business instead of only the leading edge stuff. As I recall, Altera was still committed to using TSMC for a good portion of the chips that they build. They were only using Intel for the high end stuff.