Not Everyone On Wall Street Likes Intel's Altera Deal

Intel Corporation (NASDAQ: INTC) on Monday announced the acquisition of Altera Corporation (NASDAQ: ALTR) for total value of about $16.7 billion. The consensus among Wall Street analysts, however, is that Intel overpaid in this deal.

UBS' Stephen Chin reiterated his Buy rating after the deal. Bank of America Merrill Lynch's Vivek Arya called it an "expensive but strategic deal," though the bank noted that it had "limited synergies."

By far, the most bearish note on the Street came from BMO's Ambrish Srivastava, who said that a fair value for Altera was $28 per share - not the $54 per share that Intel paid. BMO also said that Intel was unclear about the specifics surrounding the deal, notably how much debt it would use to finance the purchase. Srivastava estimated that it would run from $7 billion to $12 billion.

Related Link: Why Intel Needed To Buy Altera

But BMO was not the only firm that criticized some of Intel's rationale. Credit Suisse said that the price represented 20 or more years of Altera's cash flow, while also labeling Intel's estimate of 7 percent CAGR as "aggressive." And, while manufacturing synergies are clear, Credit Suisse's John Pitzer said it was only for N+ technology, roughly 10 percent of business by 2018.

The most bullish notes seemed to come from Canaccord Genuity and Wedbush, which suggested that the long-term outlook was improved with this alliance. Canaccord's Matthew Ramsay brushed off valuation concerns, saying that yes, the "price tag appears steep," but that it doesn't change the long-term bullish fundamentals. Wedbush analyst Betsy Van Hees added, saying that the acquisition will "drive substantial long-term growth" outside of PCs. Ms. Van Hees recommended that investors use recent weakness to buy.

Intel has sold off slightly following the news, and the stock is down 1.2 percent again in Tuesday's trading. Year-to-date, Intel stock has dipped 7.7 percent.