NEW YORK (TheStreet) -- Shares of Altera (ALTR - Get Report) were gaining 22.1% to $42.22 on heavy trading volume Friday afternoon following a report that Intel (INTC - Get Report) is in talks to acquire the programmable logic device manufacturer.

Shares of Intel were gaining 5.9% to $31.85 following reports of the acquisition.

The potential deal would be Intel's largest takeover, according to the Wall Street Journal. Terms of the potential deal and its timing aren't clear, as it is possible there will be no deal.

Altera had a market capitalization of $10.4 billion on Friday afternoon. The company is much larger than other Intel acquisitions. Intel's last acquisition was broadband access and home networking technologies company Lantiq in February.

About 6.7 million shares of Altera were traded by 3:47 p.m. Friday, above the company's average trading volume of about 2.9 million shares a day.

According to TheDeal's Jaewon Kang:

Intel has been an acquisitive player in the chip industry, most recently agreeing to purchase German fabless chipmaker Lantiq Deutschland GmbH from Golden Gate Capital for an undisclosed sum in February.

Last year, the Santa Clara, Calif.-based technology giant with a market cap of about $151 billion scooped up the Axxia networking chip business from Avago Technologies Ltd.  (AVGO for approximately $650 million and acquired fitness-tracking band maker Basis Science Inc. for an undisclosed sum. The company's biggest previous acquisition came in 2010 when it paid $7.7 billion for computer security technology provider McAfee Inc., according to The Deal.

Intel has also been offloading some assets, divesting its cloud TV business to Verizon Communications Inc.  (VZ about a year ago.

TheStreet Ratings team rates ALTERA CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALTERA CORP (ALTR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ALTERA CORP has improved earnings per share by 16.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, ALTERA CORP increased its bottom line by earning $1.52 versus $1.36 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.52).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 5.14, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $150.78 million or 15.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.69%.
  • The gross profit margin for ALTERA CORP is rather high; currently it is at 67.48%. Regardless of ALTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 23.15% trails the industry average.
  • You can view the full analysis from the report here: ALTR Ratings Report