AMD close to falling on the auction block, says analyst

Last month, we reported that the rumor mill was rife with talk of a potential merger or extended partnership between IBM and AMD. Today, eWeek quotes a research note by Technology Business Research analyst Doug Freedman that says AMD could soon end up on the auction block for a potential buyout by another company.

According to Freedman, whether AMD goes up for sale or not could depend on how well the company’s upcoming "Puma" mobile platform does in the marketplace. Puma is scheduled to hit laptops next quarter, and it will bring a new Turion Ultra mobile processor, an RS780M chipset with hybrid graphics capability, and an M8x graphics processor. Freedman believes any delay or problems with Puma "could cause a management shakeup and even the sale of the company."

If a sale happens, IBM could certainly be a potential buyer—even though both itself and AMD have denied the possibility—but Freedman says Nvidia could also be interested:

"We do not believe [Nvidia CEO Jen-Hsun Huang] would even consider leaving Nvidia to go to AMD (he told us so)," Freedman wrote in the research note.
"However, we do not believe he would walk away from the challenge of buying AMD on the cheap and turning the company around. In addition, we note that the Intel/AMD road map of integration of the CPU/GPU could pose a risk to Nvidia, and buying AMD propels Nvidia into a formidable competitor for Intel with the upside coming from Huang’s ability to re-architect AMD’s design."

Judging by figures on Google Finance, Nvidia’s current market value is $12.73 billion, while AMD’s is just $3.63 billion. A buyout by Nvidia may not be outside the realm of possibility, and it could solve Nvidia’s current problem of having no answer to the integrated CPU and GPU solutions coming soon from both Intel and AMD. Such a deal would leave only one serious contender in the discrete graphics market. Of course, since Intel is also planning a discrete GPU, the market could quickly become a two-player arena once again.

Comments closed
    • BeowulfSchaeffer
    • 12 years ago

    IBM is the only buyer that makes sense. There are already research and production arrangements between the companies. nV could never buy AMD unless they were divested of ATI. My opinion.

    • Sahrin
    • 12 years ago

    No bottomless pit is complete without the Freeman climbing out of it.

    Good luck getting this past the DoJ.

    And oh yeah, who the heck at nVidia knows how to manage a CPU portfolio? Hector and the BoD balked at handing over the reins to Huang (most likely the ONLY reason that AMD didn’t buy nVidia instead of ATI) before, and now they’re going to allow themselves to be leveraged out of a value position at a fraction of the asset value of the company?

    Don’t look now, I think Comcast is buying Verizon.

      • UberGerbil
      • 12 years ago

      AMD didn’t buy nVidia because they couldn’t afford it. By a lot. They could barely afford ATI (in fact, based on how their financial situation has developed, you could argue that they couldn’t afford ATI either).

      nVidia could get such a deal past the FTC / DOJ simply by spinning off or selling ATI. That’s obvious enough that they would announce it as part of the package.

      But it’s still not going to happen.

        • Sahrin
        • 12 years ago

        /[

      • alex666
      • 12 years ago

      I agree, an interesting read despite the problems with grammar.

    • indeego
    • 12 years ago

    I don’t see IBM acquiring. IBM has repeatedly said it wants out of managing these huge chip businesses. I think IBM makes the Cell for amusement. They have all these engineers, gotta give them something to do to keep IBM’s name in the paper. I don’t see IBM bragging particularly about it’s chip prowess, moreso on how it uses those chips to make even more powerful supercomputers.

    I see China. China wants in the chipmaking business very badly, but they themselves don’t have the right stuff. So I see a Lenovo or a conglomerate of Chinese companies getting them. They easily could afford AMD. Easily! The market potential for AMD is so great, I can see China salivating right now (I can, I picture it’s polluted rivers drooling out of it’s mouth and everythingg{.}g)

    • RambodasCordas
    • 12 years ago

    I’m sorry but who buys AMD will the debt magically disappear?
    AMD worth at least $7 Billion and is still undervalued.

    How a company that is “leader” in almost everything from CPU/GPU/IGP/CHIPSET and chips for TV, Phones can only worth less than $4B.
    If someone benchmarked all companies products from AMD vs Intel, or AMD vs Nvidia. AMD would probably win because have more and better overall.

    So something is clearly really really wrong.
    In fact if Intel or Nvidia disappeared today we where better served with AMD than if AMD disappeared and had to stick with Intel and Nvidia.
    AMD existence is more critical than any of the other two. AMD is the only company that keeps the others “honest”. Otherwise it’s just monopolies (innovation slowdown and pricy products).
    We are already suffering from having basicaly a single source Operating System (read:Vista example) who needs to have a single GPU or CPU?

    In the auto industry we have more cars because we have more manufactures so more models.
    Imagine if we had the same things with Operating Systems and hardware?
    The market keeps growing and instead of more companies we have less?!?! What’s happening here?

    Chipsets how many of this exist today?
    •Acer Laboratories, Inc. (ALi)
    •Advanced Micro Devices (AMD)
    •Eteq Components Ltd.
    •Intel
    •OPTi
    •Silicon Integrated Systems Corp. (SiS)
    •VIA Technologies
    •PCChips Manufacturing Ltd.
    •Chips and Technologies (C&T)
    •LSI Logic
    •SMC
    •UNI
    •United Microelectronics Corp. (UMC)
    •VLSI Technology

    Graphics how many of this still exist today?
    •Sis
    •Ati
    •Intel
    •S3
    •Nvidia
    •Trident
    •Silicon Motion
    •Neomagic
    •Chips and Technologies
    •Rendition
    •Number Nine
    •Matrox
    •Cirrus Logic
    •3Dlabs
    •3Dfx
    •Nec/PowerVR
    •Oak
    •Opti
    •Real3D

    ^List maybe incomplete 😉

      • Kurotetsu
      • 12 years ago

      So…you actually believe AMD would be an ‘honest’ monopoly, if put in that position? This is a joke right?

      • indeego
      • 12 years ago

      AMD may be all that, but publicly held companies *[

      • moritzgedig
      • 12 years ago

      “/[

    • green
    • 12 years ago

    since so many people mentioned nvidia…

    yes nvidia won’t really get anything good from x86 out of acquiring amd as it will apparently* invalidate the cross-licensing agreement with intel

    nvidia will, however, get a monopoly in discrete graphics (still not proven intel can deliver in this area)
    they’ll also get a much larger slice in the chipset market given via isn’t really competing anymore
    both of which (surprise surprise) are nvidia’s main products areas

    * i say “apparently” because:
    a) cbf looking for actual proof that it will be invalidated
    b) i have doubts the people that say it have first hand knowledge, or a reliable source, that can confirm it as fact. seems to be more a case of ‘it would only make sense for intel to do that’.

    • alex666
    • 12 years ago

    I’ve really enjoyed this discussion. But when all is said and done, I think any potential buyer would have to consider the following question: while the gpu/ATI and the chipset parts of AMD appear to have some life, is AMD as a CPU manufacturer simply dead at this point? Were the athlon/a64 glory days their creative high point, and at a time when Intel was lethargic and unimaginative? Even with fresh financing from a buyer, does AMD have the creative/design/engineering resources to compete with Intel CPUs at this time? Is there anything left in their tank so to speak? Does the AMD CPU manufacturer that we knew and loved even exist anymore?

    • lolento
    • 12 years ago

    Let’s all wait for 2 years for FTC to come up with a decision on whether or not Nvidia can buy AMD while the stock price of both companies gets tanked….haha

    • Wajo
    • 12 years ago

    Acquiring AMD is almost completely useless because of the patent agreement they have with Intel…

    • kilkennycat
    • 12 years ago

    AMD bought ATi… a loser before they bought them. Just barely eking out profit for the previous couple of years, after a string of losses. Now AMD has written down $1.3 billion of the $5.2 billion they paid for ATi. So pray tell me why Jen-Hsun (who is far smarter than Hector Ruiz and has far tighter control of his company) would have any idea at all in investing in a loser with about $3billion of current debt ?

    nVidia has no need to own any x86 CPU technology to satisfy their future business objectives.. They have a rapidly growing and highly-profitable venture into the distributed-number-crunching-in-a-desktop-business, sorely needed by the engineering industries and researchers, using their GPUs and their CUDA toolset. The Ageia acquisition near-instantly adds a physics library to that toolset — a far more immediately logical reason for the Ageia acquisition than video-gaming. Technical number-crunching significantly benefits from the parallelism of nVidia’s GPUs. The general-purpose (x86) CPU primarily acts only as the ‘conductor’ for this ‘orchestra’, the players in which can be expanded at will by adding more GPUs. Intel’s Larrabee tries to bundle this type of exercise within the fixed constraints of its multicore architecture and its internal memory. Multiple Larrabee’s in a system may match nVidia’s hardware performance… but how far is Larrabee away… 2 years? And how far away is the toolset needed to support the architecture, especially if the application demands parallelism of a bunch of Larrabees? nVidia will have evolved CUDA and moved on 2 generations of (GP)GPU by the time that Larrabee is released. nVidia’s next GPU family is currently well into design and is believed to have full double-precision data-paths to speed up precision numerical computations by at least a factor of three.

    Also, nVidia has significant interest in the system-on-a-chip business for use in consumer mass-markets. Consider the APX 2500, their first system-on-a-chip targeted at cell-phones, UMPs etc and running Windows Mobile. No full-x86 needed there… just an ARM core….

      • pogsnet
      • 12 years ago
    • BrynS
    • 12 years ago

    Nvidia is much more likely to purchase VIA this year than AMD. Apart from possible regulatory issues, the company structures are quite different, i.e. even AMD’s nebulous ‘asset-lite’ strategy is unlikely to meld with the high-margin fabless approach that Nvidia has really made its own — Jen-Hsun Huang doesn’t want “profitless prosperity”. Oh yeah, and AMD has a ton of debt! Isaiah looks tasty and what do you know, Nvidia has more than $2 billion in cash.

    I don’t believe Freedman has the best track record either, and while things could be a lot better for AMD; they’re hardly down and out. AMD have apparently secured *alot” of design wins for RV620 and 780G.

      • pogsnet
      • 12 years ago
    • albundy
    • 12 years ago

    looks promising if big blue takes over. they did create a successful cell cpu for the ps3.

    • pogsnet
    • 12 years ago
    • My Johnson
    • 12 years ago

    Wow, anyone notice Nvidia’s stock price dropped like a rock today? But I think the entire market was down. I’ve been sleeping all day. 😀

      • UberGerbil
      • 12 years ago

      They announced their quarterly results today. As I said in the comments for that news item: Buy the rumor, sell the news.

      NVDA is up over 10% in the past week, so it was due for a drop; more importantly, they gave guidance for lower gross margins due to 8% – 10% increase in costs, which caused several analysts to lower their targets (and it probably didn’t help that Ingram Micro reported weakening IT demand yesterday and Goldman Sachs lowered their rating on Intel today). There were a lot of casual investors who jumped in when the stock was booming last year and they’re getting shaken out now (the smart ones already took their profits and ran). Anyway, the whole market is down today on Bernanke’s comments.

      But yeah, as a growth tech stock below 20 P/E, it’s probably oversold. Some of those added costs will be because of the Aegia acquisition, so those will get rolled into a “one-time” charge to dress up the books in a future quarter. It’s going to get hit whenever Intel announces a move in graphics, though, so it’s not without some risk.

    • ToeBot
    • 12 years ago

    I’d like to think the FTC would stop a buyout by Nvidia, but considering whose running the country, I wouldn’t be surprised to see it go through.

    • SpotTheCat
    • 12 years ago

    If nVidia buys AMD… would that be like nDaamit?

    • Headzero
    • 12 years ago

    The purported problem with Puma

    §[< http://www.thestreet.com/_yahoo/newsanalysis/techsemis/10403329.html?cm_ven=YAHOO&amp;cm_cat=FREE&amp;cm_ite=NA< ]§ "We believe the mere potential for a problem with Puma, even if a fix is in the works and the platform is scheduled for an "on-time" launch, will likely have an impact on initial volumes for the [refresh of the notebook product line for the spring]," Freedman wrote in a note to investors. Translation If there was a problem, which we are not saying there is, and there was already a fix for the problems which may or may not exist, and the platform launched on time with no problems, this imaginary problem and its fix might impact initial volumes. I think we all know that this means "Crap - I didn't get in when it was low and its going up so I need to knock it down so that I can get in low." Screw this guy. He has no basis for this call. AMD legal should be crawling all over this guy to see what his position in Intel is, what his companies position in Intel is, and to have him disclose where he came across this information. Then the next day (today), he retracts what he said §[<http://www.thestreet.com/_yahoo/newsanalysis/techsemis/10403567.html?cm_ven=YAHOO&amp;cm_cat=FREE&amp;cm_ite=NA<]§ Rumors of an Advanced Micro Devices notebook glitch are ringing false. A day after issuing a note to investors suggesting that AMD's forthcoming Puma chipset for notebook PCs could be suffering from a bug, the author has put out a new note conceding that there does not appear to be any such bug. And now on the same day as his retraction, he tries to start a new rumor about AMD getting chopped up and bought out. This guy is going to be raked over the coals and be investigated. He is an intel shill.

    • cRock
    • 12 years ago

    I swear most stock analysts smoke crack in their spare time.

    AMD is fine. They are hurting from the Phenom debacle to be sure, but the real fight lays ahead when we have GPU/CPU integration in mainstream mobile and desktop parts. AMD is poised to do much better there thanks to their acquisition of ATI. AMD is carrying a ton of debt right now, but that debt was acquired on EXTREMELY favorable terms. They would have been fools not to leverage the company in these last few years. The credit markets have tightened up a lot now so woe be upon anyone needing to borrow cash for an acquisition.

    The rumor that IBM would consider picking up AMD was absurd. IBM just spent a decade divesting itself from the PC hardware business. There is absolutely no reason to think they’re suddenly interested in getting back into it, especially with Power alive and well.

    Nvidia would be equally looney to take on such a burden right now. Any large AMD stockholders know that the stock is undervalued and they would demand a mighty premium from Nvidia. That would force Nvidia out into the credit market where they would have to take on a very nasty loan (not a lot of loose money on Wall Street after that little sub-prime thing). For it’s trouble, Nvidia gets a marginally profitable CPU division, a graphics division it doesn’t need, and a bunch fabs it doesn’t need. If Nvidia was so worried about an x86 license, it could always just buy poor little Via and take a pass on all of those things it doesn’t need. It might even get some other interesting things in the deal and further enhance relations with TSMC. Fact is, Nvidia will just build x86 chips as it pleases and let Intel sue them if they like. A lot of those patents are expired now anyway.

    They only truth in the analyst’s statement is that AMD needs a good showing from Puma in the mobile space. While they are behind Intel on CPUs, but they have an advantage right now on the GPU front. Puma should be able to turn that advantage into a successful platform.

    • ssidbroadcast
    • 12 years ago

    Hm. What about a purchase by Samsung?

      • UberGerbil
      • 12 years ago

      I speculated (in the “AMD Going Under?” thread) that the leading candidates for a buyout (which overall is unlikely IMO unless AMD gets even cheaper and/or its new fabs get closer to production) would be the big semis — Toshiba, Fujitsu, Samsung.

        • ssidbroadcast
        • 12 years ago

        Yeah I like Samsung. I know they mostly do RISC-based processors, but that experience might give them the edge they need to restructure AMD.

    • Fastfreak39
    • 12 years ago

    Honestly, AMD can’t limp along for a little while longer until it can release something that sells?

      • DASQ
      • 12 years ago

      Well they’ve been limping for a while now… how much longer do you expect them to drag?

        • UberGerbil
        • 12 years ago

        At current burn rates they have cash for a couple of years. And their burn rate /[

    • UberGerbil
    • 12 years ago

    NVIDIA buying AMD? Not going to happen.
    1. The x86 license doesn’t transfer if AMD isn’t the surviving corporation. To get their hands on it nVidia would have to structure the deal so that it looks like a reverse takeover, and the resulting entity is called AMD. Ugly, and probably subject to a lawsuit from Intel anyway.
    2. The FTC would require nVidia to spin off ATI as a condition of allowing the merger, either as a (once again) independent entity or as a sale to someone else.

    As a result, what does nVidia end up with: some fabs, and a lot of debt. If nVidia wants fabs and debt they could just get both of them (the latter to obtain the former) without going through any acquisition, and it would probably be cheaper and less disruptive. But there’s no indication nVidia wants to depart from being fabless (and they seem happy with their fab partners, who are moving aggressively towards new nodes).

      • Meadows
      • 12 years ago

      NVidia’s “aggressive” fab partners make it seem as if Radeon cards have more advanced manufacturing processes behind them.

        • UberGerbil
        • 12 years ago

        They were lagging for a while (and will always lag the leading edge folks like Intel) but they’ve started moving recently. It doesn’t happen overnight, though, and so nVidia doesn’t see the benefit immediately.

      • lyc
      • 12 years ago

      +5 insightful

    • Nitrodist
    • 12 years ago

    In other news, Intel has mass reserves of money.

      • UberGerbil
      • 12 years ago

      And no way to use them on AMD without drawing regulatory fire.

        • Nitrodist
        • 12 years ago

        One can dream, can’t they? 😛

          • DASQ
          • 12 years ago

          Why would Intel want AMD at this point? They’ve already got their own graphics architecture in the works.

          • UberGerbil
          • 12 years ago

          Single source for x86 chips? Sounds more like a nightmare to me.

    • DrDillyBar
    • 12 years ago

    Hypothetical:
    – Nvidia get’s AMD
    – Intel get’s ATI
    competition secured.

      • nagashi
      • 12 years ago

      AMD bought ATI a while back. Lurk Moar 😛

        • insulin_junkie72
        • 12 years ago

        That doesn’t mean the possibility in #10 is impossible, though.

        • just brew it!
        • 12 years ago

        I think he means the company would be split up and sold off piecemeal.

      • ssidbroadcast
      • 12 years ago

      I would allow that.

    • seawolf1118
    • 12 years ago

    Well its time for M$FT to think about buying AMD/ATI, that would be a huge surprise…

      • UberGerbil
      • 12 years ago

      Microsoft likes to be profitable. So, uh, no.

        • lethal
        • 12 years ago

        Xbox?

          • Convert
          • 12 years ago

          There have been a few exceptions, plus it was a good product.

          *runs and hides*

          • UberGerbil
          • 12 years ago

          I meant as a company as a whole. They’re willing to make investments in areas that are unprofitable in the short term if they serve larger strategic interests or look to be profitable in the long term. The game division is now making money on an on-going basis (which is the only one that matters).

          I don’t see how acquiring AMD would serve their strategic interests (particularly their partnership with Intel, which is already testy at times) or would offer an opportunity for increased profits in the future.

      • DASQ
      • 12 years ago

      I didn’t know they allowed dollar symbols in stock tickers.

      How about you grow a pair and type “MSFT”?

        • seawolf1118
        • 12 years ago

        there was a rumor while back that M$FT was looking into video card market and since XBox360 uses ATI gpu, plus just for about $3.63 Bil, that’s like pocket change for Billy G. so…. it would be a nice move for them to buy AMD/ATI and i think most of all we, as a customers would have gr8 compitetion from M$FT, INTC and NVDA don’t u?

      • My Johnson
      • 12 years ago

      M$ makes good driver software unlike Intel, so….

    • ReAp3r-G
    • 12 years ago

    light at the end of the tunnel for AMD it sounds like

    man if NVIDIA buys AMD…they’d own ATI as well right? wouldn’t that be anti-trust country? hmm…

    • srg86
    • 12 years ago

    There are two problems for this merger or buy out. First of all, the x86 cross-licensing agreement with Intel is not referable, so if AMD is bought out, that is nullified if Intel wants. Also, at least the foreseeable future, it would create a discreet graphics monopoly, I can’t see it getting through the regulators.

      • ew
      • 12 years ago

      So if Intel nullified the agreement wouldn’t that mean they’d have to give up the 64bit extensions which are AMD’s invention.

        • Hdfisise
        • 12 years ago

        and it would basically create a CPU monopoly in the mainstream so the chances of intel revoking AMD’s license is small.

    • Convert
    • 12 years ago

    Call me crazy but somehow I doubt AMD’s upcoming mobile solution is going to turn any heads.

      • srg86
      • 12 years ago

      Especially as its processor is just a K8 with improved Hypertransport, memory controller and energy saving.

        • JustAnEngineer
        • 12 years ago

        AMD’s already got far superior integrated graphics to the competition. If the next integrated graphics core uses less power and provides better performance, they could do quite well.

    • Meadows
    • 12 years ago

    “The Freedman must follow.”

    • donkeycrock
    • 12 years ago

    hahahahahaahahhahahahahahahahahahahahahahahahahaha

    thats all i have to say

    • DrDillyBar
    • 12 years ago

    That’d light a fire under intel

      • Gerbil Jedidiah
      • 12 years ago

      Seems like the fire is already lit. They’ve had AMD on the ropes for almost 2 years now, and it doesn’t look like they’ll be through punching any time soon.

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