Daily Tech Snippet: Tuesday, June 2

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• The Chip Industry Consolidates - In The Third Big Chip Merger of the Year, Intel Agrees to Buy Altera for $16.7 Billion. Recent months have seen a flurry of deals in the semiconductor sector, a business that has become prohibitively expensive for all but the biggest players. On Monday, Intel, the world’s largest maker of chips, said it would pay $16.7 billion for chip company Altera. Last week, Avago Technologies agreed to pay $37 billion for Broadcom. And in March, a company called NXP Semiconductors paid $11.8 billion for Freescale Semiconductor, which began life as part of Motorola and specializes in chips for sensors and cars. “Ten years ago the cost from designing a new chip to making it a product was $10 million to $50 million,” said Mark Hung, an analyst with Gartner. “Today it’s $100 million to $200 million. Solving weird and challenging physics problems at this small size requires a lot of expensive equipment. That’s why there’s all this M.&A.” Besides gaining so-called economies of scale, Intel hopes Altera puts it in better shape for two of the biggest emerging markets, large data centers and the so-called Internet of Things, or computer-enriched machines that work with other devices. Altera’s primary chips help Intel target that market. The San Jose, Calif., company’s chips can be reprogrammed once they leave the foundry, altering some of their functions. Intel’s semiconductors are more powerful, but lack that flexibility. By combining the two types on a single chip, Intel thinks that by late next year it can start offering its big business customers ways of fine-tuning performance to suit specific needs. Also, Intel has fallen behind another big chip company, Qualcomm, in the market for low-powered chips that run mobile devices even as sales of chips for personal computers have slowed. For Intel, improving what it can do in newer, growing sectors is essential. Shares of Altera closed Monday up 5.8 percent. Intel shares were down about 1.6 percent.

• Intel’s $16.7 Billion Altera Deal Is Fueled by Data Centers: Intel Corp. agreed to buy Altera Corp. for $16.7 billion to defend its presence in data centers, forging a deal that will add to a record year for industry consolidation. The world’s largest chipmaker will pay $54 a share in cash for the maker of programmable logic semiconductors, Intel said in a statement Monday. That’s a premium of 11 percent over Altera’s closing share price on Friday and 56 percent from March 26, the day before the possibility of a transaction was first reported. Intel, like other chipmakers, is seeking to contend with growth and rising costs, while trying to defend its most profitable business. The largest deal ever in the $300 billion semiconductor business was announced last week when Avago Technologies Ltd. agreed to buy Broadcom Corp. for $37 billion. Acquiring Altera may help Intel defend and extend its most profitable business: supplying server chips used in data centers. While sales of semiconductors for PCs are declining as more consumers rely on tablets and smartphones to get online, the data centers needed to churn out information and services for those mobile devices are driving orders for higher-end Intel processors and shoring up profitability. Sales at Intel’s data-center division rose 19 percent in the first quarter as Internet companies such as Google Inc. and Facebook Inc. built out their server operations. As a part of Intel, Altera will continue to support designs that couple its chips with others designed on ARM Holdings Plc technology. Companies such as Qualcomm Inc. are preparing to use that to try to break Intel’s dominance in data-center chips, where it has more than 98 percent of the market.

• The history of the Border Gateway Protocol (BGP) - the long life of a quick fix: Internet protocol from 1989 leaves data vulnerable to hijackers: “Short-term solutions tend to stay with us for a very long time. And long-term solutions tend to never happen.” Such is the story of the “three-napkins protocol,” more formally known as Border Gateway Protocol, or BGP. At its most basic level, BGP helps routers decide how to send giant flows of data across the vast mesh of connections that make up the Internet. With infinite numbers of possible paths — some slow and meandering, others quick and direct — BGP gives routers the information they need to pick one, even though there is no overall map of the Internet and no authority charged with directing its traffic. The creation of BGP, which relies on individual networks continuously sharing information about available data links, helped the Internet continue its growth into a worldwide network. But BGP also allows huge swaths of data to be “hijacked” by almost anyone with the necessary skills and access. The main reason is that BGP, like many key systems on the Internet, is built to automatically trust users — something that may work on smaller networks but leaves a global one ripe for attack. Hijackings have become routine events that even experts struggle to explain: What made traffic between two computers in Denver take a 7,000-mile detour through Iceland? How could a single Pakistani company crash YouTube? Why did potentially sensitive Pentagon data once flow through Beijing? To these questions, there are technical answers. But they all boil down to this fact: BGP runs on the honor system, allowing data to get pushed and pulled across the planet in curious ways, at the behest of mysterious masters. In 1989, when BGP was devised, the big issue of the day was the possibility that the Internet might break down. A halt in its furious expansion would have hurt the network’s users and the profits of companies supplying gear and services. Rekhter at the time worked for computing giant IBM; Lougheed was a founding employee of Cisco, maker of networking hardware. “We needed to sell routers. And we had a strong economic motive to make sure this party would continue,” Lougheed said. “When Yakov and I showed up with a solution and it seemed to work, people were quite willing to accept it because they didn’t have anything else.” There were other efforts underway to build routing protocols. BGP won out because it was simple, solved the problem at hand and proved versatile enough to keep data flowing as the Internet doubled in size, again and again and again. Networks across the world embraced the protocol, giving it an edge it has never relinquished. Once technologies are widely deployed, they become almost impossible to replace because many users — including paying customers of technology companies — rely on them and resist buying costly new hardware or software. The result can be a steady buildup of outdated technology, one layer on top of another. It’s as if today’s most important bank vaults sit on foundations of straw and mud.

• Just Dial’s Q4 revenue up 26%: mulls buy-back of shares: Online local business search engine company Just Dial Ltd reported earnings: Annual operating revenue increased by 28 per cent to Rs 589.80 crore over FY14 for the full year ended March 31, 2015. The firm’s operating income rose 25.8 per cent at Rs 156.28 crore during the quarter against Rs 124.21 crore in Q4 FY14. Founded by Mani in 1994, Just Dial is a local search firm that provides listings of small and medium businesses across the country. Lately it has been expanding its business by adding transaction services for its merchants allowing consumers to buy products and services from third-party vendors like a marketplace. With the most recent addition of products, it has become the first significant listed firm involved in product e-commerce marketplace. Last month, one of the early investors of the company, Tiger Global exited from the firm. Meanwhile, the company said that a meeting of the board of directors will be held on June 4, to consider the proposal to buy-back the fully paid-up equity shares of the firm.