MAAs reported by the Wall Street Journal, Advanced Micro Devices, or AMD is in talks to attain Xilinx in a deal that may perhaps be valued at more than thirty billion dollars. It assumes that Xilinx is able to land a decent premium to its non-affected market value of a little under twenty billion dollars. The deal will pair 2 chip makers that naturally work at very dissimilar ends of the market but then again have both been aiming at data centers recently. Both also hinge on the cutting-edge fabrication processes of Taiwan Semiconductor Manufacturing, to truly manufacture their chips.
Investors are likely to be fascinated. AMD’s share price slipped only three percent. There was a tame reaction seeing the dilutive effect of what is likely to be mostly a stock deal by a firm sitting on just over one billion dollars in net cash. The advanced microdevices have been on fire lately with its stock price up more than two hundred percent over the past 1 year. Whereas, the American semiconductor manufacturing company, Xilinx is up only eight percent in that time, however, its non-affected valuation of thirty-six times forward earnings is one of the uppermost on the Philadelphia Stock Exchange Semiconductor Index.
Image from Xilinx
To validate the price, the Santa Clara-based multinational semiconductor company (AMD) will need to assimilate the types of programmable chips which are made by Xilinx into its own offerings to create new growth prospects. That has so far evaded Intel, Altera, (which is Xilinx’s top rival) back in the year 2015. Intel believed that deal would reinforce it’s data-center corporate. It does certainly linger to lead the space, but it remains indistinct what role Altera has frolicked. Intel’s programmable-solutions segment, mostly encompassing Altera, showed profits of only under two billion dollars in 2019 which is less than three percent or above what Altera testified the year before being credited.
Intel also had a much greater business to fold Altera into. AMD is 1/10th the size of its contender, making Xilinx a much bigger fish to gup. Forecasters note that Xilinx brings bigger profit margins. But after a move this striving especially at a time when the trade war between the United States and China has made any chief semiconductor deal unsafe. There will need a robust argument than only wadding the bottom line.