Altera purchase could signal start of acquisition wave

SAN FRANCISCO -- Intel's purchase of chip maker Altera could be the beginning of a wave of possible companies in play as a frothy tech sector with full coffers looks around at what it needs to stay competitive, analysts say.

While deal-making is a constant, news that world-dominant Intel was buying Altera in an all-cash transaction valued at approximately $16.7 billion could be a note of things to come.

The sale is one of several deals in the chip-making world in the past year, including Singapore's Avago, which will purchase U.S.-based Broadcom for $37 billion and Freescale Semiconductor, going to Dutch chip maker NXP Semiconductors for $11.8 billion cash and stock.

That consolidation is just one aspect of a larger trend in the tech space, analysts says.

Technology is starting to look like the pharmaceutical industry, where the big players don't innovate themselves but instead buy up smaller, more nimble firms that do, said Max Wolff, chief economist with Manhattan Venture Partners.

Tech behemoths now feel they need to have a finger in "everything," just as Google does, Wolff said.

But that's very expensive and spreads staff and expertise very thin at a time when both are hard to come by. Instead, companies are focusing on doing things they do profitably and well, "and then partnering or buying into other areas," he said.

Apple is an excellent example of this strategy.

"They not only have their own internal growth, but then they go out and buy virtual reality companies and music companies and headphone companies and chip analytics companies," said Michael Yoshikami, CEO of Destination Wealth Management.

With the possibility of a shake-out, smaller companies are looking at how they can monetize what they've created. Computer chips, networking and hardware especially are looking at how to take out costs, with mergers and acquisitions one way to do it.

"I would suspect that's what a lot of CEOs are thinking," Yoshikami said.

On the software side of things, the names of several possible acquisition targets are frequently bandied about. The biggest in the mix is Salesforce, which makes customer-relationship software.

Speculation swirled earlier this month that the company might be on the block. Possible suitors included Oracle, Microsoft, IBM, SAP and Google.

Another company that's often named as a purchase magnet is Flipboard, a social-network aggregator that puts feeds into a magazine-format mobile app.

In the past few weeks there have been rumors that Twitter, Yahoo or even Google might be looking in Flipboard's direction.

Also much-discussed is the music-streaming service Pandora, which beat analysts' expectations this quarter. That could make it more attractive to buyers.

Another frequently mentioned site is the review service Yelp, which has been actively looking for a buyer. While it's been doing well, others have been replicating its core service.

The tech companies have varying attitudes about being sold, from Yelp, which is open to the idea, to Salesforce, which has said that's not its focus.

Calling the tech space "frothy," Wolff said, "whenever you get to this level of excitement about tech, things are going to happen."