AMD Is in Advanced Talks to Buy Xilinx
October 08 2020 - 9:35PM
Dow Jones News
By Cara Lombardo and Dana Cimilluca
Advanced Micro Devices Inc. is in advanced talks to buy rival
chip maker Xilinx Inc., according to people familiar with the
matter, in a deal that could be valued at more than $30 billion and
mark the latest big tie-up in the rapidly consolidating
semiconductor industry.
The companies are discussing a deal that could come together as
soon as next week, the people said. There is no guarantee they will
get there, especially given that the talks had stalled before
recently restarting, according to some of the people.
AMD's market value now tops $100 billion after its shares soared
89% this year as the coronavirus pandemic stokes demands for PCs,
gaming consoles and other devices that use the company's chips.
Second-quarter revenue rose 26% to $1.93 billion, while net income
jumped more than fourfold to $157 million on the back of record
notebook and server-processor sales, AMD said.
The surge in AMD shares could embolden the company to make an
acquisition using its stock as currency. Xilinx has a market value
of about $26 billion, with its shares up about 9% so far this year,
just ahead of the S&P 500's 7% rise.
With a typical takeover premium, a deal would value the company
at more than $30 billion.
AMD, based in Santa Clara, Calif., is led by Chief Executive
Lisa Su. In addition to desktop and notebook computers, it makes
components used in gaming systems such as Xbox and PlayStation that
have been in high demand as the pandemic forces people to stay at
home. It also has a growing data-center-processor business that
increasingly rivals that of Intel Corp., long the dominant player
in that segment.
The addition of Xilinx, led by CEO Victor Peng, would put AMD on
a more even competitive footing with Intel and give it a bigger
position in fast-growing telecommunications and defense
markets.
San Jose, Calif.-based Xilinx's chips are used in wireless
communications, data centers and industries such as automotive and
aerospace. Its shares have been hurt by trade tensions between the
U.S. and China, and namely the Trump administration's limitations
on shipments to China's Huawei Technologies Co. because of security
concerns. Analysts estimated Huawei accounted for roughly 6% to 8%
of Xilinx's revenue.
Xilinx makes microchips called field-programmable gate arrays,
or FPGAs. Unlike standard chips, they can be reprogrammed after
they are produced. That makes them valuable in rapid prototyping
and in fast-emerging technologies where there isn't enough time to
go through a yearslong development process necessary for other
chips.
FPGAs are commonly used in new superfast 5G telecommunications
infrastructure, although they may be replaced later by standard
chips once the technology is more mature. They are also often used
in military communications and radar systems.
Intel is the other main player in the FPGA market, having built
its business by acquiring Altera Corp. in 2015.
AMD, which specializes in central processing units that serve as
computers' digital brains, has been gaining share on Intel in
recent years, releasing new generations of processors that match or
beat its larger rival's on many performance benchmarks. AMD had
around a 20% share in personal computer CPUs as of the second
quarter, according to Mercury Research, up from around 8% three
years ago.
Consolidation has swept through the semiconductor industry as
chip makers seek scale and expand their product portfolios to
support the increasing number of everyday items that are connected
to the internet. Xilinx, for one, has considered a number of
potential tie-ups in recent years that didn't come to fruition.
Should AMD and Xilinx reach an agreement, three of the year's
largest deals so far would be in the semiconductor industry,
according to Dealogic data. Analog Devices Inc. in July agreed to
pay more than $20 billion for Maxim Integrated Products Inc. and
Nvidia Corp. in September agreed to pay $40 billion for Arm
Holdings, the British chip designer backed by SoftBank Group
Corp.
Mergers-and-acquisitions activity generally has been sluggish in
2020 as a result of the pandemic, with announced global and U.S.
volume down 18% and 40%, respectively, according to Dealogic.
Lately, however, it has shown signs of life as companies gain
confidence to make big strategic moves. NextEra Energy Inc.
recently approached Duke Energy Corp. with a takeover proposal that
would likely value the North Carolina utility at well over $60
billion and count as the year's largest deal.
That activity has confounded predictions that the looming
election would cause deal makers to sit on their hands awaiting
clarity on what kind of administration is likely to be calling the
shots for the next four years.
Asa Fitch contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
October 08, 2020 21:20 ET (01:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Advanced Micro Devices (NASDAQ:AMD)
Historical Stock Chart
From Aug 2024 to Sep 2024
Advanced Micro Devices (NASDAQ:AMD)
Historical Stock Chart
From Sep 2023 to Sep 2024