Intel acquires Altera. First time we heard about this deal was in June, the companies signed the letter of intent on May 30. Total consideration to shareholders is more than $16.7B, this is the largest Intel's acquisition. Previous huge deal Intel closed in April 2010 when they acquired McAfee for around $7.7B. How it can help to improve Intel's operations First of all, Intel is an absolute leader in producing the chips for data centers. The company holds 78% market share and it seems that no one can move them from the top. Qualcomm and other such companies are trying to break the dominance producing their own chips based on the developments of ARM Holding. As far as 4G/LTE market is rapidly growing, it will increase the demand for FPGAs (field programmable gate arrays) - one of the Altera's products. Basically speaking, "FPGA allows you flexibility in your designs and is a way to change how parts of a system work without introducing a large amount of cost and risk of delays into the design schedule." (Source: Altera's book about FPGA). FPGA is used everywhere, FPGA is used by all the companies that provide the cloud computing services or run data centers services to its clients - Amazon Web Services, Google, Baidu, Alibaba, Tencent and Microsoft. Intel is producing CPUs, which is completely different story. CPU is the actual processor and it is designed to perform a number of operations but the way these operations are performed may not be best for all applications. So, once again, CPU is a processor, you can do nothing with it except what it's designed to do. FPGA is a the empty chip, empty piece of paper, here you can do whatever you want (or almost anything). Combining the FPGA and CPU in terms of the business means that you will most likely have the total control of the chip market. Altera is one of the leaders on the market of FPGA producers, and I think that from the business point of view this is a "win-win" for both companies. As soon as Intel wants to increase its revenues in data centers segment and its growth was limited because of absence of own FPGA production, this acquisition can improve the data centers business. Financials Altera needed this acquisition. The company's revenue and margins are going down, however, its margins are still very high. EBIT and EBITDA margins are 24.1% and 27.9% respectively. The company's cash flow decreased as well, cash flow from operations from $666M last fiscal year to $544M LTM. Intel has a better situation - revenue is stable (grew up by 0.3% LTM), EBIT margin dropped down from 28% last year to 26.4% LTM. So I assume if the acquisition goes well, Intel will increase its EBIT and EBITDA margins by 1-2% next year. According to the Q3 results, for three months ended September 2015 Data Center group contributed $4.14B in revenue which is 28% of total revenue. The company will most likely have a significant jump in Data Center group revenues as well as in Cloud Computing Group. Short summary However, there are always a lot of risks in such big deals, both companies showed negative dynamic in margins, which makes the investment decision non-obvious. Intel pays 2.7% in dividends. I think that from the market perspectives point of view - this is a great acquisition, from the financials point of view, we still have some questions like how the company will deal with its margins, how it can implement Altera's technologies to the current data centers and current clients and so on. I'd better be careful with Intel, however the company will be on top of my watching list.