What Happened?
Shares of semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) jumped 7.8% in the afternoon session after Bloomberg reported that the company is making an offer for Intel's Altera business, which is a direct competitor in the field-programmable gate arrays (FPGAs) market. With Lattice's valuation at approximately $7.5 billion—compared to the $17 billion Intel paid for Altera—there are indications that the deal may require additional parties such as private equity and complex structuring to enable Lattice to do the deal.
Lattice's stock reaction suggests the market sees the benefits of a potential deal. Lattice creates field-programmable gate arrays (FPGAs) and other specialized chips, directly competing with Altera's offerings. Acquiring Altera would complement Lattice's design and manufacturing capabilities, creating a stronger combined entity. In addition, the acquisition would significantly expand Lattice's market share and global reach, improving the company's rank in the semiconductor industry. Lastly, the deal would eliminate a key competitor.
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What The Market Is Telling Us
Lattice Semiconductor’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock dropped 18.1% on the news that the company reported weak second-quarter results. Its revenue and EPS both missed Wall Street's estimates. Looking ahead, guidance for next quarter's revenue also missed analysts' expectations. The company called out industry headwinds, adding, "Second quarter 2024 results reflect the impact of cyclic industry headwinds. While the industry continues to go through a period of inventory normalization, we are starting to see signs of improvement. We continue to execute on our ongoing product portfolio expansion and remain well positioned for long-term growth." Overall, this was a mediocre quarter for Lattice Semiconductor.
Following the results, a Bank of America analyst downgraded the stock's rating from Neutral to Underperform, citing "slowing growth prospects and muted visibility.".
Lattice Semiconductor is down 15.5% since the beginning of the year, and at $57.75 per share, it is trading 30.9% below its 52-week high of $83.57 from March 2024. Investors who bought $1,000 worth of Lattice Semiconductor’s shares 5 years ago would now be looking at an investment worth $2,966.
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