Intel sells stake in Altera at about half the valuation it bought it for in 2015

Intel jumped Monday after announcing a deal to sell a 51% stake in its Altera unit to private equity firm Silver Lake, as CEO Lip-Bu Tan takes his first tangible step at remaking the ailing American chip giant.

According to Bloomberg, which broke the news, the deal values Altera at roughly $8.75 billion, which sounds like a healthy chunk of change until you reflect on the fact that Intel spent about $16.7 billion for Altera back in December 2015. (Adjusting for inflation, that would be almost $23 billion today.)

Back then, it was the biggest deal that Intel had ever done, and even at the time Wall Street analysts were wondering if then CEO Brian Krzanich was overpaying.

Altera specializes in chips called field programmable gate arrays, or FPGAs, which can be customized by end users after they leave the factory and are widely used in networking and wireless equipment.

At the time of the deal, they were being used alongside Intel chips in the company’s highly profitable data center business, as they helped speed Intel’s chips. Back then, defending Intel’s position as a top supplier of the chips used in the server systems that powered the internet was a top priority.

Ostensibly, the acquisition seemed to perform fairly well. Company executives regularly talked up the Altera unit — renamed Programmable Solutions Group — and its strong sales growth.

But it’s hard to asses exactly how profitable the unit has been as the company stopped breaking out those results a few years back. In its statement on the deal Monday, Intel said on a GAAP basis, Altera posted a $615 million operating loss last year. At any rate, the Altera acquisition clearly wasn’t enough to help Intel offset the slump in its core cloud and enterprise server business.

With Intel’s roughly $47 billion in long-term debt looming, the reported $3.4 billion in cash from the sale to Silver Lake could come in handy, as Tan attempts a truly massive turnaround at Intel.