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Intel buys Altera for $16.7 billion

Intel says it plans to integrate Alteras field-programmable gate array chips with its own Xeon processors, resulting in more flexible computing and server products.

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Consolidation in the semiconductor industry continues to heat up, with Intel announcing Monday that it plans to acquire Altera for $16.7 billion.

Under terms of the deal, Intel will pay $54 a share in cash for the San Jose, Calif.-based Altera, which is known for making programmable logic devices and related development software.

News of the acquisition comes after months of rumored talks between the two tech companies. However in April it appeared a deal was off the table when Altera rejected Intel's original offer, speculated to be in the $50 per share range.

With an agreement now finalized, Intel is hoping to use Altera to expand its portfolio beyond personal computing. Intel says it plans to integrate Alteras field-programmable gate array (FPGA) chips with its own Xeon processors, resulting in more flexible computing and server products.

"Intel's growth strategy is to expand our core assets into profitable, complementary market segments," Intel CEO Brian Krzanich said in a statement. "With this acquisition, we will harness the power of Moore's Law to make the next generation of solutions not just better, but able to do more."

A professional relationship between Intel and Altera dates back to 2013, when Intel's manufacturing processors became the foundation for Altera's 64-bit ARM chip. The manufacturing ties will obviously continue and become more tightly integrated following the acquisition.

Other recent Intel purchases include Axxia's network chip business for $650 million in August 2014 and broadband and networking gear maker Lantiq this past February.

Overall, Intel's purchase of Altera is indicative of a larger consolidation trend in the semiconductor industry. Last week, Avago announced a $37 billion deal to acquire rival chipmaker Broadcom, representing the largest purchase ever in the semiconductor space.

As was the case with Avago and Broadcom, Intel and Altera will benefit not only from a boost to product lines and potential revenue, but also from increased bargaining power over customers and manufacturers.