Baird Keeps Neutral on Intel, $20 Price Target

Baird analyst Tristan Gerra reiterated a Neutral rating and $20 price target on Intel (NASDAQ: INTC).

“Intel announced this morning a definitive agreement to sell 51% of Altera to Silver Lake, valuing Altera at $8.75 billion (5.7x 2024 revenue). Intel will retain the remaining 49%.

Raghib Hussain will succeed Sandra Riveria as the CEO of Altera effective May 5, 2025. Hussain previously served as President of Products and Technology at Marvell (not covered).

The transaction is expected to close in 2H2025. Altera generated $1.54 billion of revenue in 2024, with non-GAAP gross margin and non-GAAP operating margin of 49.9% and 0.23%, respectively.

This sale would close a long chapter where Intel had purchased Altera for $16.7B in a deal which closed in Dec 2015, primarily for FPGAs’ potential in data center on the heels of Microsoft’s Project Catapult which pioneered the use of FPGAs for acceleration.

However by Dec 2019 Microsoft was publicly admitting that FPGAs were not ready for primetime in data center acceleration, primarily due to an immature ecosystem – they had lost the battle against GPUs and CUDA.

Additionally, after Altera had announced pre-acquisition that Intel would manufacture its chips, manufacturing moved back to TSMC after acquisition, in the process helping Xilinx gain market share.

Derivative: There are opportunities to rebuild Altera’s market share medium-term, which we think will primarily be in high-end FPGAs densities.

Altera has made a couple of attempts to push into the mid-range over the past ten years, to no avail. We think it will take time before Altera could potentially compete against Lattice’s Avant.

We do however see flight risks for Lattice’s management ahead of a potential Altera IPO.

While high-end FPGAs have traditionally and continue to be exposed to communication cycles (most recently 5G), we see opportunities for high-end FPGAs notably for emulation (AI custom ASICs), ADAS, along with industrial.

As reference point, in 2020 Xilinx’s revenue breakdown was as follows: Aerospace & Defense, Industrial: 45%; Comm: 25%; Automotive/Consumer: 19%; Data center: 7%.”

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