Advanced Micro Devices has hired JPMorgan Chase & Co to explore options, which could include a sale, as the chipmaker struggles to find a role in an industry increasingly focused on mobile and away from traditional PCs, according to three sources familiar with the situation.
The company's stock surged 18 percent on the news before ending up 5 percent at $2.09 on the New York Stock Exchange.
Sources told Reuters on Tuesday that an outright sale of the company is not a priority, and other options for AMD could include a sale of its portfolio of patents.
AMD said in an email to Reuters, "AMD's board and management believe that the strategy the company is currently pursuing to drive long-term growth by leveraging AMD's highly-differentiated technology assets is the right approach to enhance shareholder value. AMD is not actively pursuing a sale of the company or significant assets at this time."
One of Silicon Valley's oldest chipmakers, AMD is laying off engineers and some analysts are concerned it may not find new markets for its chips in time to reverse a declining cash reserve.
AMD's shares have fallen more than 60 percent this year, giving it a market value of about $1.4 billion. It also has long-term debt and capital lease obligations of about $2 billion.
A JPMorgan spokeswoman declined to comment.
Since the early 1980s, AMD has competed with much larger Intel and at times has made inroads with its PC and server chips. But setbacks at AMD limited those gains and AMD now faces new competition from companies designing low-cost and power-efficient chips based on ARM Holdings' technology.
Like Intel, Sunnyvale, California-based AMD was caught flat-footed in recent years with the emergence and fast growth of mobile devices.
But while Intel has deep pockets to fund research on new products to catch up, AMD faces declining cash flows and a more modest balance sheet.
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Some investors believe part or all of AMD could be bought by a technology company that might want to emulate Apple Inc's tight control of software and components, a strategy credited in part for the success of the iPad and iPhone.
One source described AMD as a "legacy company" and said it might prove difficult to sell because of its dependence on the PC industry and lack of strong mobile offerings.
Another source mentioned AMD's game console chip business and growing focus on embedded chips as the company's silver linings.
Microsoft Corp, Google Inc, Samsung Electronics, Intel Corp and even Facebook Inc have been suggested by Wall Street analysts as potential suitors that could benefit from some of AMD's chip business, including its graphics division, PC processors and server chips.
Others say AMD's most valuable asset may be its deep bench of engineers or its patents.
AMD said last month it would slash 15 percent of its workforce, while devoting more resources to areas outside of its traditional PC business, including communications, industrial and gaming applications.
Last week, AMD said it added a second board member from its leading shareholder, Mubadala Development Co, which owns 15 percent of the chipmaker.
Rory Read took over as AMD's CEO in 2011 promising to fix long-standing execution problems that have plagued the chipmaker. But AMD has continued to lose money as well as market share to Intel and graphic chip rival Nvidia.
In October, Read told analysts on a conference call he had underestimated the speed of change in the PC industry and said AMD would move quickly to focus on selling chips for communications, industrial and gaming applications.
Goldman Sachs analyst James Covello estimated in a recent note to clients the chances of AMD's PC processor business being sold are between 15 percent and 30 percent.
Rather than selling AMD, bankers could help the chipmaker strengthen its finances in order to acquire technology it believes it needs to tackle new markets, said Williams Financial analyst Cody Acree.
"Right now they don't have the currency on their balance sheet or their share price to make an acquisition (of another company) viable," Acree said.
AMD recently announced it has licensed technology from ARM and will use it to build low-power chips for servers. But those products aren't expected to launch until 2014.
With the company burning through cash, industry analysts have recently become concerned about future liquidity.
AMD's cash declined $279 million in the third quarter to $1.48 billion. AMD said it was reducing its "optimal" cash target to $1.1 billion from $1.5 billion due to the business' now smaller size.
Well... I honestly can't think of much to say. I'm frankly quite surprised, what with both PS4 and XBox720 dev kits (possibly the release console as well) using A10s, the 7xxx series being great, and Piledriver being a huge improvement. Intel/Nvidia monopoly is bleh.
On another note, Reuters's list of possible suitors seems like . "Microsoft Corp, Google Inc, Samsung Electronics, Intel Corp and even Facebook Inc"? Not seeing it at all. I'd look at a fab company (which I guess makes Intel a qualifier), or even an ARM developer (Samsung qualifies), not these guys.
Seems like a lot of speculation to me. AMD has certainly not struggled to find a role in the mobile market seeing as how it's APU's have been very successful with laptops and netbooks.
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They are still reeling from the failure of BD and those couple of months were Nvidia was the way to go for GPU's, back when they slashed prices. Cheap powerful GPU's is great for consumers but it really shows how scared they are that the 7970 is $430. Also, the difference between Intel's budgets for R&D compared to AMD's is phenomenal. About 2.72 billion, to be precise. Just thought that would help you compare how big each company is compared to one another.
They are still reeling from the failure of BD and those couple of months were Nvidia was the way to go for GPU's, back when they slashed prices. Cheap powerful GPU's is great for consumers but it really shows how scared they are that the 7970 is $430. Also, the difference between Intel's budgets for R&D compared to AMD's is phenomenal. About 2.72 billion, to be precise. Just thought that would help you compare how big each company is compared to one another.
You can not compare Intel vs AMD on R&D budget. Intel has to put money into its Fabs its compilers. When was this Nvidia has not held the GPU market flat out ever in recent years.
You can not compare Intel vs AMD on R&D budget. Intel has to put money into its Fabs its compilers. When was this Nvidia has not held the GPU market flat out ever in recent years.
This was right after Nvidia released their 6xx series and AMD still had driver issues. You could still buy a 7xxx card but the 6xx cards were better at the time.
This was right after Nvidia released their 6xx series and AMD still had driver issues. You could still buy a 7xxx card but the 6xx cards were better at the time.
No not even then AMD still held the low and mid end the larger part of the market.
Well... I honestly can't think of much to say. I'm frankly quite surprised, what with both PS4 and XBox720 dev kits (possibly the release console as well) using A10s, the 7xxx series being great, and Piledriver being a huge improvement. Intel/Nvidia monopoly is bleh.
On another note, Reuters's list of possible suitors seems like . "Microsoft Corp, Google Inc, Samsung Electronics, Intel Corp and even Facebook Inc"? Not seeing it at all. I'd look at a fab company (which I guess makes Intel a qualifier), or even an ARM developer (Samsung qualifies), not these guys.
You can not compare Intel vs AMD on R&D budget. Intel has to put money into its Fabs its compilers. When was this Nvidia has not held the GPU market flat out ever in recent years.
This was right after Nvidia released their 6xx series and AMD still had driver issues. You could still buy a 7xxx card but the 6xx cards were better at the time.
No not even then AMD still held the low and mid end the larger part of the market.
Their current graphics cards totally kick ass
They have apu's in all big next gen consoles
Vishera processors are very good
The lack a decent server CPU and not many laptops are shipping with APUs.
They are coming out with more things does not mean it will actually push into the market.
Incorrect. Tons of laptops are using APUs, especially in the budget area.
They may be using but it still does not mean tons are shipping Intel products are in the majority of them shipping.