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Altera' Enpirion Buy Boosts FPGA Line

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Semiconductor chip giant Altera Corp. (ALTR - Free Report) recently took over privately-held power converter chip maker Enpirion Inc. for a cash consideration of roughly $141.0 million. Altera expects to wrap the transaction by the end of second quarter 2013.

U.S.-based Enpirion is a fabless supplier of analog power management solutions. Enpirion’s PowerSoCs (System on Chips) portfolio features high-frequency switching, magnetics, integrated inductors and packaging. The company ships its products into communications infrastructure, enterprise, industrial and storage end markets.

With the acquired capability, Altera will be able to offer more comprehensive, high performance, low power consuming (the usage of low-noise switching regulators can reduce power consumption by 50% in select applications), lower footprint FPGA (Field-programmable gate array) chips. In addition to this, Altera will be in a position to compete with analog semiconductor companies such as Texas Instruments Inc. (TXN - Free Report) and Linear Technology Corp. , who have strong foothold in the power management solutions space.

Altera expects the acquisition to add $6.0 million in operating expenses in 2013. Revenues from the unit are expected to be approximately $12.0 million for the rest of 2013. However, given the growing demand for power management chips, Altera expects revenues of roughly $35.0 million in 2014. The acquisition will not materially impact earnings per share in 2013 and 2014.

Altera’s incessant endeavour to enhance its FPGA portfolio will help it to gain share in the PLD (Programmable logic device) market. Altera has also joined forces with chip giant Intel Corp. (INTC - Free Report) for its transition into 14 nanometer (nm) chips.

Apart from this, Altera acquired TPACK, a wholly-owned subsidiary of Applied Micro Circuits Corp., for a cash consideration of $34.0 million. With TPACK, Altera aims to strengthen its position in the OTN (optical transport network) equipment market that is anticipated to reach $13 billion by 2017, according to research firm Infonetics. The acquisition shows Altera’s intention to expand its presence in the booming OTN market, in addition to the PLD market.

Despite Altera’s growth potential, we prefer to remain on the sidelines given Xilinx Inc.’s leadership in the 28 nm nodes, volatility in semiconductor market and soft telecom market.

Currently, Altera has a Zacks Rank #3 (Hold).

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