AMD Is Said in Talks to Buy Rival Xilinx in $30 Billion Deal
AMD is mentioned in talks to buy $ 30 billion worth of rival Xilinx
(Bloomberg) - Advanced Micro Devices Inc. is in advanced talks to acquire Xilinx Inc. in a $ 30 billion acquisition, according to those familiar with the matter.
The deal could hit as soon as next week, although things will continue to flow, people said, asking not to be identified to discuss a private deal.
A combination with Xilinx would give AMD CEO Lisa Su more of the parts needed to hold Intel Corp.'s stranglehold. break in the profitable data center computer components market. It would follow the steps of rival Nvidia Corp. follow Mellanox Technologies Ltd. and intends to complete the upcoming acquisition of Arm Ltd. to use to take over more of this business.
The acquisition of Xilinx, which makes programmable chips for wireless networks, would also help AMD expand into a new market, just as telecom providers are spending billions building fifth generation or 5G networks.
Read more: Check out Chip Stocks again on NXP Beat, AMD-Xilinx Takeover Report
What Bloomberg Intelligence Says
AMD's interest in Xilinx is both a shield and a sword against Intel's diverse data center resources, Nvidia's GPUs, Mellanox's assets and the potential purchase of Arm in the UK. Xilinx's FPGAs would expand AMD's computational versatility and expand CPU and GPU capabilities to include AI and networking. The deal can also be financially positive.
- Anand Srinivasan and Marina Girgis, analysts
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An acquisition of Xilinx is fueling an industry consolidation that accelerated in 2020. Business in the chip sector has spiked this year, including Nvidia's proposed $ 40 billion purchase of Arm. With both possible acquisitions, the value of pending or completed semiconductor deals would exceed $ 100 billion in 2020, the highest in at least 10 years, according to data compiled by Bloomberg.
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Xilinx, based in San Jose, California, manufactures field programmable gate arrays or FPGAs. This type of chip is unique in that its function can be changed by software even after it has been built into a machine. Xilinx chips have been used in telecommunications equipment in the past. However, under CEO Victor Peng, the company is expanding into data center products where FPGAs can be used to accelerate workloads such as artificial intelligence. The other major supplier of advanced FPGAs is Intel, which strengthened its market position by purchasing Altera Corp. acquired in 2015.
AMD and Xilinx officials declined to comment on the negotiations, which the Wall Street Journal first reported.
Xilinx stock rose 16% on Friday in New York ahead of trading, while AMD stock fell 2.6%. Xilinx closed at $ 105.99 on Thursday, which translates into a market cap of $ 25.9 billion, which is roughly a quarter of the value of AMD. AMD's Santa Clara, Calif. Shares closed at $ 86.51. The stock nearly doubled this year.
Under Su, who took over the helm in 2014, AMD has come back from the brink of failure. It has made gains in desktop computer processors and laptops over long-time rival Intel. The company is also working to reverse its fortunes in the server business, where chips can cost as much as a small car. Intel had relegated AMD to less than 1% of that market for years. AMD's interest in Xilinx reflects the increasing demands of cloud service providers like Amazon.com Inc. and Google from Alphabet Inc. These companies are spending a lot of money on new data centers to meet the growing demand for computing power over the Internet. They are also striving to improve services such as searching with artificial intelligence software, and many companies are experimenting with developing their own hardware for it. This puts the chip providers under greater pressure to further develop their offers.
AMD-Xilinx Combo Helps Cloud Diversify Intel, Nvidia: Respond
For AMD investors, the company's intent to fund the deal may prove crucial in getting them to sign. The chipmaker recently addressed concerns about its cash reserves and was hit by debt from its 2006 acquisition of graphics chipmaker ATI Technologies. As of the end of the last quarter, AMD had $ 1.8 billion in cash, less than several other chipmakers. Nvidia is using stock to partially fund the purchase of Arm while acquiring Maxim Integrated Products Inc. Analog Devices Inc. is an all-stock deal. This partly reflects a huge increase in the value of chipmakers in recent years, led by AMD and Nvidia. Xilinx shares didn't do that much. The stock is up 8% this year, compared to a 27% increase for the Philadelphia Stock Exchange Semiconductor Index. AMD is up almost 90%, making it the second best performer after Nvidia. Approving transactions in the chip industry has been made difficult by the ongoing trade war between China and the US. The Asian country is the largest buyer of chips and America is home to the largest group of producers.
(Updates with stocks, chip sector deals, and analyst comment from the fifth paragraph)
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