Intel’s History of Failed M&As: The Cause and the Impact

Intel (INTC) missed out on the mobile revolution, so now it’s trying to catch up, investing in new areas such as autonomous cars and artificial intelligence. Below are some of Intel’s past M&A (merger and acquisition) activities:

• In 2015, Intel acquired Altera for $16.7 billion with an aim to integrate its FPGA (field-programmable gate array) technology in its data center, IoT (Internet of Things), and memory chip business.
• In 2011, Intel acquired McAfee for $7.7 billion to integrate the latter’s security solutions into its chips.
• In 2010, Intel acquired Infineon Technologies’ baseband segment for $1.4 billion to integrate its wireless technology into its chips.

In the past few years, Intel has spent more than $30.0 billion on M&As, which generated revenues of less than $4.0 billion annually, according to Stacy Rasgon, an analyst at Bernstein.

Intel has a history of capitalizing on technology outside computer chips.

Intel’s acquisition of McAfee aimed to bring security to the chip, but that never happened. Enterprise Strategy Group analyst Jon Oltsik said, “The McAfee and Intel deal never really delivered on any synergies.” The only way McAfee contributed to Intel was by selling stand-alone security products. The security business generated revenues of $2.2 billion and profits of $400.0 million in fiscal 2016.

After five years and no synergies, Intel decided to sell a 51.0% stake in its security business to private investment company TPG in a $4.2 billion cash-stock deal. The new company will eye enterprise data centers while continuing to serve device manufacturers and service providers.

Another big failure was Intel’s acquisition of Altera, which aimed to expand Intel’s data center and IoT (Internet of Things) business. Instead of rising, data center revenue has fallen to single digits, and Xilinx (XLNX) now has a one-year technology lead over Altera.

So far, Altera hasn’t realized any merger objectives. The only way it has benefited Intel is by selling stand-alone FPGAs (field-programmable gate arrays) under PSG (Programmable Solutions Group). PSG generated revenue of $1.7 billion and reported a loss of $104.0 million in fiscal 2016.

Intel’s acquisition of fitness watchmaker Basis also failed after Basis was hit by a large recall in fiscal 2016 that forced it to shut down Basis operations.

Intel’s acquisition of embedded systems software maker Wind River Systems also didn’t deliver the expected synergies.

Intel is now looking to avoid all the mistakes it made in the past and do it right with Mobileye (MBLY). In the next part of this series, we’ll see how Intel plans to integrate Mobileye in a profitable way.