NEW YORK (TheStreet) -- Intel's (INTC) bid to buy fellow chip maker Altera (ALTR) may have sent both stocks up Monday, the day it was announced, but analysts are split on the long-term impact of the deal on Intel's stock.
The offer is valued at $54 a share, or $16.7 billion, and would strengthen Intel's server-focused subsidiary, Data Center Group, at a time when the company's rivals are focusing on producing chips for mobile devices.
While Data Center Group's revenue went up by 19% year over year to $3.7 billion in the first quarter, revenue at Client Computing Group, the company's largest unit, dropped 8% year over year to $7.4 billion. For the quarter, that left Data Center Group with operating income of $1.7 billion and Client Computing Group with $1.4 billion.
Intel shares recently fell 1.6% to $33.34 while Altera shares were flat at $51.73.
There was no broad-based consensus on the deal from analysts, though some highlighted growth potential in data center profits as cause to invest in Intel.
Here's what a few had to say:
BMO Capital Markets analyst Ambrish Srivastava (Market Perform, $33 PT)
"We do not like Intel's acquisition of Altera. We really do not see the opportunity/rationale that Intel is laying out for parting with ~$17 billion. Specifically, we do not concur with Intel's assumption of 7% CAGR for the business. Altera has grown at a negative CAGR of 2% in the midst of one of the more aggressive carrier CapEx builds we have seen. We do not like the valuation that Intel is paying for ALTR, especially in light of our view of the opportunity. On a stand-alone basis, we view ALTR to be worth $28. We are struggling with how this deal will add value to shareholders in the long term."