Altera (ALTR) Stock Spikes as Standstill Agreement with Intel Expires June 1

Editor's Note: The story has been corrected to reflect that the stand-still agreement expires June 1, not May 1 as was reported.

NEW YORK (TheStreet) -- Altera (ALTR) shares are up 7.99% to $45.01 in trading on Friday following reports that the undisclosed standstill agreement the semiconductor manufacturer signed with Intel (INTC) earlier this year expires June 1, allowing Intel to make a hostile bid for the company, according to Reuters.

Intel shares are climbing 1.2% to $32.93 in early market trading today.

Altera rejected Intel's $54 per share offer in April after the two sides had been negotiating for months, according to Reuters sources, with the Altera engaging in the talks on the condition that they would not be made public.

Acquiring Altera, which makes programmable chips widely used in cellphone towers and industrial applications and by the military, would fit into the company's previously announced plans to expand into new markets, according to Reuters.

Altera released its first quarter financial results last week, reporting a first quarter net profit of $95 million, or 31 cents per diluted share which missed analysts expectations by one cent. Revenue for the period was $435.5 million. also short of analysts' $470.4 million guidance.

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 a few notable strengths, 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 largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • 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 4.41, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has slightly increased to $136.63 million or 4.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -38.79%.
  • ALTERA CORP's earnings per share declined by 16.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. 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 ($1.64 versus $1.52).
  • The gross profit margin for ALTERA CORP is rather high; currently it is at 67.05%. 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, ALTR's net profit margin of 21.78% compares favorably to the industry average.
  • ALTR, with its decline in revenue, slightly underperformed the industry average of 1.4%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: ALTR Ratings Report
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