Advanced is in discussion to purchase Advanced Micro Devices Inc. According to people familiar with the matter, Xilinx Inc. in an acquisition.
The deal could happen early next week, although things remain in flux, with people saying the private deal will not be discussed.
A combination with Xilinx will give the greater part of the pieces needed to break AMD CEO Lisa Su Intel Corp. choke on profitable market for data center computer components. It will follow moves by the opponent Nvidia Corp., which bought Melanox Technologies Ltd. and aims to use its pending acquisitions Arm Limited to grab more of that business.
Acquiring Xilinx, which produces programmable chips for wireless networks, will also help AMD expand into a new market, as telecom carriers spend billions to build fifth-generation, or 5G, networks.
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What Bloomberg Intelligence Says
AMD’s interest in ExilinX is both a shield and a bulwark against Intel’s diversified data-center computing assets, Nvidia’s GPUs, the assets of Melanox and the possible purchase of a UK-based branch. Xilinx’s FPGAs will expand AMD’s computing diversity, widening its CPU and GPU capability in AM and networking. The deal may also be financially prosperous.
– Anand Srinivasan and Marina Girgis, analysts
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A Xilinx takeover is accelerated in 2020 which promotes an industry consolidation. Deal activity in the chip sector has increased this year, including Nvidia’s proposed $ 40 billion purchase of Arm. With both possible acquisitions, pending or completed semiconductor deals will be valued at $ 100 billion in 2020, the most in at least 10 years, according to data compiled by Bloomberg.
Xilinx, based in San Jose, California, makes field programmable gate arrays or FPGAs. Such a chip is unique because its function can be changed by software, even if it is installed in a piece of machinery. Xilinx’s chips have historically been used in telecommunications devices, but under CEO Victor Peng the company is expanding into products targeted at data centers – where FPGAs can be used to speed up workloads such as artificial intelligence . The other major supplier of advanced FPGAs is Intel, which has acquired its market position through purchase Altera Corp. in 2015
Representatives of AMD and Xilinx declined to comment on the talks, which previously appeared in the Wall Street Journal Reported.
Shares of Xilinx closed in New York on Thursday at $ 105.99. This gives a market capitalization of about $ 25.9 billion, a quarter of AMD’s value. Shares of Santa Clara, California-based AMD closed at $ 86.51. The stock has almost doubled this year.
Under Su, which took the helm in 2014, AMD is back from the brink of failure. It has profited against longtime rival Intel in desktop computer processors and laptops. The company is also working to reverse its fortunes in the server business, where chips can cost as little as a small car. For years, Intel had re-launched less than 1% of that market.
AMD’s interest in Exilinx reflects growing demands from cloud-service providers such as Amazon.com Inc. And Google of Alphabet Inc. Those companies are spending heavily on new data centers to meet the demand for computing power provided via the Internet. They are also in the running to enhance services, such as search, with artificial intelligence software, and many companies are experimenting with building their own hardware to do so. It is putting more pressure on chip providers to increase their pressure.
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For AMD investors, how the company intended to finance the deal could prove instrumental in persuading them to sign it. The chipmaker has recently shed concerns about its cash reserves and suffered from debt arising from the 2006 acquisition of graphics chipmaker ATI Technologies. At the end of its most recent quarter, AMD had $ 1.8 billion in cash and equivalents, lower than many others. chipmakers.
Nvidia is using the stock partly to fund its purchase arm, while Analog Devices Inc Acquisition of Maxim Integrated Products Inc. is an all-stock deal. This marks a huge run-up in the value of chip companies led by AMD and Nvidia in recent years.
Xilinx shares have not made that much cry. The stock has risen 8% this year with a gain of 27% by the Philadelphia Stock Exchange Semiconductor Index. AMD has grown nearly 90%, making it the second best performer after Nvidia.
Approval of chip-industry transactions has been complicated by the ongoing trade war between China and the US The Asian country is the largest buyer of chips and the US is home to the largest group of producers.
– assisted by Peter Ellstrom, and David Morris
(Chip sector deals from fifth sector and updates with analyst comment)