Intel’s next acquisition?

The sudden increase in Intel’s cash position in Q2-17 is interesting and unexpected. There is no immediate cash need in the company so we might hear acquisition news from Intel soon.

It is not a secret that Intel is struggling to grow at market rates. 9% growth in Q2-17 (compared to Q2-16) is not stellar in a market that is growing 25% in the same period. Much of this is memory growth that only benefits Intel marginally. Excluding memory growth, the market grew 11% in the same period.

Intel has made an asymmetric bet on the future. The company want to win in Automotive, IoT and Data Center but organic growth will not get Intel meaningful revenue (compared to PC and server revenue) sufficiently fast. The acquisition of MobileEye was a move into the ADAS applications of automotive and the acquisition of Altera was aimed at the AI part of the Data Center. Even though Intel owns most of the processing in the enterprise and cloud Data Center, it has not had visible success in the fastest growing segment of the Data Center: Artificial Intelligence. From 0% two years ago, AI now accounts for more than 10% of the total processing volume in the Data Center and Intel has lost momentum to Nvidia in particular. The Altera acquisition has not changed this yet.

We don’t believe Intel is satisfied with the current momentum in the Data Center and could be looking to add other products attractive to in particular Cloud customers. With Nvidia out of financial reach, Intel could target smaller fish with success in the Data Center: AMD, Marvell and Microsemi could be on the shortlist.

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