AMD Shares up Five Percent On Rumored Dell Buyout

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News Posted: Wed, Feb 16 2011 2:44 PM
The question of what's next for AMD took an interesting twist this morning as the company's stock rose ~ five percent on the rumor that Dell might be interested in acquiring the CPU designer. To say 2011 has been a tumultuous year for AMD thus far would be an understatement; the company has launched major new products, fired its CEO, turned in a solid Q4 2010, and dismissed two additional board members all in the last six weeks.

The rumors of a potential buyout aren't just leaking in anonymously. This latest is courtesy of Barrons and Bloomberg with the latter noting that, according to Patrick Wang with Wedbush Securities, "there's no management team there [at AMD]." According to Wedbush, while there's 'chatter' regarding a potential AMD takeover, it's a far-fetched possibility.


AMD's Brazos platform and Zacate CPU are both turning heads

AMD has been the topic of more proposed mergers and buyouts than we can remember, but there are specific reasons why the company might currently be attractive to a would-be purchaser. Before the GloFo spinoff, anyone interested in buying AMD would have been required to purchase multiple foundries in which they had neither interest nor practical use. AMD's debt situation is improved from where it was a few years ago, and the recent performance of new Ontario and Zacate processors proves that Sunnyvale has a response to Intel in the netbook / notebook market.

There's also the unknown status of AMD's x86 license. Originally, the terms of that license were quite strict and drastically limited Sunnyvale's ability to hire other foundries to produce processors. Back then, it was legally impossible for AMD to transfer the x86 license, even if it sold itself entirely to another company. That may have changed when the two manufacturers' finalized their anti-trust settlement from back in 2009.

In short, AMD's position is now different enough from what it was that a buyout option is more plausible. Even if the Dell rumor comes to nothing, however, Wang's statement that AMD has no current management team is an ominous one. It suggests that AMD prices may have risen not because Dell is seen as a good fit, but because Dell would provide a sense of direction and focus that Wall Street feels is currently lacking.

Firing Meyer, Seyer, and Rivet definitely sent the message that AMD's BoD didn't like their plans for the future. Unfortunately, no one has stepped in, even in an unofficial capacity, to articulate any sort of consensus on what the company should be doing. CEO's don't operate in a vacuum; corporate executives aren't mindless drones who slavishly follow the dictates of a single person. AMD has already taken the unusual step of sacking every corporate executive hired before 2006; a move that's unlikely to make the CEO's attempts to build a new corporate structure any easier.

Analyst's comments on the current situation generally imply that AMD isn't sharing the details of its CEO search or the reasons for various dismissals at the high end of the financial analysis market any more than in the shallows. If Wall Street doesn't see more evidence of a distinct corporate strategy in the near future AMD's stock could be headed for trouble. 
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If AMD was acquired by DELL, what would this mean for diy builders and also resellers like cyberpower? Would AMD chips still be available?

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coolice replied on Wed, Feb 16 2011 3:24 PM

Oh yea, its not like they would only produce chips for dell... the company will still work and produce what it does best.... cpu's, gpu's, apu's and valentines day sucker-punches which are loved by the public including me.

What i'm more interested about is in, if dell does purchase AMD, will that undermine dell and intels relationship? dell only builds pc's on the intel structure...

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CDeeter replied on Wed, Feb 16 2011 3:52 PM

I don't see how Dells purchase of AMD would not change their relationship with Intel. I think the impact would be quite large. How would Dell be able to justify continuing to building computers with Intel chips to their stock holders? Doing so would be taking profits from their own pockets. At the very least Dell would have to put AMD chip in every product and make Intel optional.

I really hope that this merger does not happen. I don't know why there was the shake up at the top of AMD, it seems as though AMD has been making a good comeback lately, and feel they are better off going it on their own.

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Drago replied on Wed, Feb 16 2011 5:57 PM

Dell will never buy AMD cause they would loose their ability to build computers and servers with Intel parts.

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coolice replied on Wed, Feb 16 2011 6:20 PM

What makes you say they will lose it?....

Why would intel stop selling to dell?? dell probably easily sells a couple of million intel powered devices a year.... thats 100's of millions of revenue that goes straight to Intel... why would intel want to stop making money?

If anything, it would cause intel to be more competitive... HP is trying to make their own software platform, Sony/Toshiba and other computer manufactures dont even come close to the amount of sales that the bigger companies made, acer already invests in both intel and AMD.

... it would cause intel to seriously reconsider to gain a higher market share and greater techniques to penetrate the market further. nVidia isnt helping either with their new hardware haha.

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LLeCompte replied on Wed, Feb 16 2011 8:24 PM

i lost faith in dell a very long time ago, and i hope they dont buy amd. Im happy amd's stocks are up, but i think if dell buys them they will go down hill.

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AKwyn replied on Wed, Feb 16 2011 11:13 PM

I can see Dell buying them for their fabrication abilities. Other then that, I don't think a Dell buyout would be beneficial for them.

 

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Super Dave replied on Wed, Feb 16 2011 11:52 PM

LLeCompte:

i lost faith in dell a very long time ago, and i hope they dont buy amd. Im happy amd's stocks are up, but i think if dell buys them they will go down hill.

I feel the same way. This could cause me to become an Intel-kinda-guy.Tongue Tied

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rapid1 replied on Thu, Feb 17 2011 12:26 AM

Yeah this makes little sense unless you think about the fact that DELL has been making a good amount of there own stuff as of late. Not that they did not makes PC's in various configurations prior to that. They lately have been making there own smart phones and slate units. While buying PC or even whitebook components for laptops, when you step into the Slate/Smart Phone market you are really in a new market sector. With a lot of development on the APU's and Graphics as well as the new chips they have on docket but not yet released from Opteron and Bulldozer builds as well as others I could see it as a good acquisition. I could even see them being able to get back on track with the options they sold out years ago, as it would no longer be AMD, but Dell as a company. I still do not know how it makes sense as many have commented, but I am also not a Billionaire like Michael Dell either. He also has complete financial and forecast as well as executive teams which most of us don't to weigh out the probability.

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Kiristo replied on Thu, Feb 17 2011 6:25 AM

I'm a Intel supporter all the way, but part of Intel making better stuff is having a good competitor. Intel's been "winning" in my opinion for a few years, but AMD is still putting out great chips. I just hope they are not diminished in any way, buyout or not. Hell, if AMD re-took the lead of the processor competition in more fields, it would only make Intel work harder.

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