Intel's M&A history: Should it worry Altera?

There is no telling what will become of Altera after its pending acquisition by Intel comes to a close. However, once can only imagine the suspense that awaits the programmable logic device manufacturer's product, technology roadmap and employees.

At the moment, indications are that Intel is treating Altera with kid gloves, while plotting its integration with extreme care. Intel's customer FAQ, for example, clearly states the processor giant's plan to "fully support and grow Altera's existing FPGA business," and its intention to extend "continued support and development of Altera's ARM-based product lines."

As the Intel Developer Conference (IDF) opens this week in San Francisco, Intel is also giving Altera space and opportunity to strut its stuff. At IDF, Altera is showcasing the use of FPGAs to provide high-bandwidth, low-latency connections to network and storage systems. Altera will also demonstrate FPGAs for compression, data filtering and algorithmic acceleration.

Nonetheless, plenty of sceptics are doubtful about the Intel-Altera deal, both external and internal to Altera.

The anxiety level within Altera is said to be very high. Employees' resumes are flying around, with many jockeying for new positions and trumpeting their achievements to future employers.

This is a frantic scene familiar to anyone who has faced an upcoming merger, especially this year, which has marked an unprecedented M&A flurry in the global semiconductor industry.

The big worry among industry analysts and engineers is a worst-case scenario in which Intel squashes Altera, pushing newly acquired talent, products and technologies into oblivion as though they had never existed.

Sounds too paranoid?

A few observers have fuelled this fear by pointing out Intel's poor or "almost non-existent" record in managing M&A's. They bitterly remember details of mergers where things went horribly wrong.

Many analysts simply blame Intel's PC-centric mentality. This is a perception that the world's largest semiconductor company has been unable to shed for decades. Others point out Intel's inability to integrate fellow chip vendors after acquisitions, although software companies acquired by Intel have done pretty well afterward.

Whatever the reason, look no further than a host of networking and communication companies Intel bought in late 1990's, according to several industry analysts.

Nathan Brookwood, research fellow at Insight 64, said, "During the Craig Barrett era they bought a slew of communications hardware companies. Paul Otellini sold most of them off at pennies on the dollar when he became CEO."

Here's a snapshot of what happened during Intel's spending spree during that era:

Intel shelled out $2.2 billion to buy Level One Communications in 1999. Level One became a wholly-owned subsidiary reporting into Intel's Network Communications Group.

Also in 1999, Intel spent $1.6 billion for DSP Communications Inc., a provider of CDMA and TDMA baseband processors. The company became a wholly owned subsidiary of Intel, operating within its Computing Enhancement Group.

Intel spent $780 million in 1999 for computer-telephony specialist Dialogic Corp., which was put into its Enterprise Server Group.

In 2000, Intel paid $1.3 billion to get optical network chip supplier Copenhagen-based Giga A/S (2000). Giga then became a subsidiary of Intel, reporting into the Level One Communications subsidiary.

Will Strauss, president of Forward Concepts, estimates Intel spent a total of $10 billion for these acquisitions and other smaller communications vendors during the 1999-2001 period. He said, "I believe that none, I repeat none, of those acquisitions became profitable or even helpful for Intel."

So what happened to those acquired companies?

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