Why AMD Should Buy ARM Now
If there has ever been a company that should be acquired, it is British chip designer ARM. AMD would be an amazing fit.
When AMD announced earlier this week that it would host ARM to hold a keynote at its upcoming software developer conference, I started poking around in the industry to see how close AMD and ARM really are. AMD's PR firm called the two companies "strange bedfellows" and the opportunity that both companies have in using technologies such as OpenCL would put Intel at a disadvantage. Whether that is really the case or not, I got really stuck on the "bedfellows" note. Seriously, "bedfellows"?
What was strange about this announcement is that AMD promised earlier this year that it would be introducing x86 processors for tablets and smartphones in late 2011 or in early 2012, which would mean that ARM, even if it is just designing chips and not manufacturing them, is the rival to beat in the market. Why would you invite your competitor to speak at your developer conference? The answer could either go into two directions: Either AMD simply wants to annoy Intel by suggesting that AMD and ARM are in a close relationship or AMD and ARM are, in fact, already in a very close relationship.
AMD did not deny that it is working with ARM, but simply stated that it is always evaluating its options. You know, the usual talk. My sources, however, indicate that AMD and ARM are not just pretending. They are working together and will be cooperating on a larger scale. The word "acquisition" has been mentioned, but it appears unlikely that any such announcement will be made at AMD's conference. However, I am told that a partnership announcement is what we should expect. Think about it: AMD and ARM in one bed. A whole new world of opportunity for both of them. And completely new dimension of a headache for Intel.
After a day of making phone calls, I am convinced that AMD should be acquiring ARM - It would be the best purchase AMD has ever made. ARM licensed 1.15 billion ARM-based processors that went into mobile devices such as smartphones and tablets in the first quarter of this year - in one quarter, not one year. An additional 700 million ARM processors went into desktop boxes, digital TVs as well as micro-controllers. ARM's revenue is still relatively small, but is quickly increasing: Its revenue was $185.5 million in the first quarter, up from $143.3 million last year. The profit before taxes was $84.5 million. AMD posted a net income of $510 million on sales of $1.6 billion in the first quarter and it appears as if AMD is more and more recovering.
AMD's problem, however, remains mobile. x86 is not the accepted standard in smartphones and tablets and such a product will require a tremendous amount of marketing and sales efforts and an incredibly compelling product. Intel is trying to pull this off with oak Trail, but it remains to be seen if this first product is good enough. Even if it is, the first tablets won't be mega-sellers and only the successor of oak Trail might be good enough for a smartphone, which means that Intel's x86 agenda for phones may not work until 2013. ARM, on the other side, is deeply entrenched and every day Intel misses to compete is a lost day for the blue team. With the reach ARM has, it is already extremely difficult for Intel to get a foot on the ground and now we are seeing ARM expanding to digital TVs, an area Intel claimed for itself and x86 chips. What if AMD would acquire ARM in this scenario and what reasons would ARM have to agree?
AMD has done non-x86 chips before, it would not be anything the company isn't used to. With ARM, AMD would actually be ahead of Intel in this quickly growing new market and AMD would take over hundreds of licensees - ARM signed 39 new licensees just in the first 3 months of the year. While its x86 business would not do much, AMD could add its chip design experience - and especially its GPU business. Adding its GPU knowledge would shift the tides in the market - not only would Intel have a serious performance problem on its hands, but it would also be interesting to see how Nvidia, which builds an ARM-based Tegra chip, would react.
As juicy as an ARM acquisition may look like, and as much I would like to see AMD buy ARM, I do not think that we are going to see an announcement anytime soon. For now, it may be dramatic enough for Intel if AMD was building ARM-based processors and added its own GPU technology to it.
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They should
... iPhone 6 will have a radeon in it...
I don't see why AMD has to buy ARM when ARM can license their technology for an inexpensive fee.
It might be a good move for AMD overall if it helps to keep them from going under but it wouldn't do very much for the desktop space. Anything to keep AMD cashy, alive and still able to make CPU/GPUs.
Who knows such an acquisition may well be the feather that tipped the scales and made AMD the front runner in the slowly shifting move to sub-mobile computing.
AMD
ATI
ARM
The A Team must be formed!
Though is AMD in a position to buy them? As in do they have the money to do it? Maybe a merger would be more in line with the whole thing though I don't know all that much...
But they sold their low power GPU solution to Qualcomm, Adreno anyone? Talking about vision...
Naturally, after reading this article I jumped over to check ARM's stock data and all I can say is that even though an acquisition may be good for business, ARM isn't exactly a healthy choice for investors.
As of April 29, 2011, ARM has a P/E ratio of 104.50 (!!!), which is huge especially when comparing it to similar chip-producing companies - Nvidia 45.40, Texas Instruments 13.40, Qualcomm 25.00.
This is a huge indication that ARM's stock is over-inflated and is soon due for a massive correction.
AMD's market cap($6.4B) is less that half of ARM.H($14.5B). How would AMD buy ARM???
Around the time when NVidia settled with Intel and officially dropped all future work on the Intel/AMD chipset business and when the rumors were coming out about NVidia and "Project Denver" (before the official project's announcement) I thought NVidia would merge/buyout ARM just to get back at AMD and Intel for stepping on their turf.
Arm as a company worths twice as much as AMD. Shouldn't it be the other way around?
Good piece, Wolfgang. An AMD-ARM union would be fascinating and surely constitute the biggest competitive threat to Intel in years. There are some serious obstacles, though. Can you imagine how Nvidia would react, having invested heavily in ARM architecture for both Tegra and Project Denver, if its chief graphics rival suddenly owned ARM? Even though AMD and Nvidia just struck a deal to make SLI chipsets for AMD, I don't think these two are going to get THAT cozy.
I'd like to see this happen, or at least a partnership deal. It would probably help AMD.
Djridonkulus, ARM isn't a chip-producing company. They sell IP.
Even if AMD could buy ARM, what would be the point?
I don't think AMD has enough cash to buy ARM at this point even if it wanted to!!!
I don't think AMD has enough cash to buy ARM at this point even if it wanted to!!!
Think 'Merger', not 'Acquisition'...
Even if there's no acquisition from one to the other, what Mr. Gruener's sources say is true, ARM + AMD is one big power house if you think that what ARM is lacking atm is a lil' more graphics juice (there's still no full profile h264 decoding at 1080p that I know of). Fusion is one hell of a proof concept that turned out really profitable and AMD has to expand it's market, and there's where ARM comes in so darn handy. Intel should be scared about it IMO. Their Itanium RISC-steal arch should be moved into the mobile arena instead of the x86 "power hog".
The future seems weirdly positive for AMD and its surroundings IMO. Hope ARM and AMD develop together something interesting for us to see in the near future.
Cheers!
Next time, try researching before you write such a silly article.
ARM does NOT manufacturer chips. They sell/license IP for their architecture. Companies such as Marvell, Samsung, NVidia, TI, Qualcomm, etc manufacturer.
AMD could not possibly afford to purchase ARM. Even if they could, then what? I don't believe that ARM is allowed to compete against the companies who they license their IP to. AMD would just have a larger IP base, and some more income to sink into their declining x86 business. Maybe they could bankrupt ARM while they're at it.....
this has to be one of the stupidest articles i have ever read.
does anyone do any f'n research anymore. ARMH is worth 2.5 times more than AMD is. Even if some bank was willing to finance AMD, they would be paying interest on those loans for infinity. In fact financially it would make more sense for ARM to buy out AMD, but then why would ARMH want buy a 2nd place AMD when ARM is the new Intel. Duh...
The A's from companies famous for be represented by 3 letters. Its a match made in heavy. I can come up with 3 puns right now about this with tic-tac-toe alone.
This needs to be done. The marketing that AMD needs to buy writes itself. A good start for a new department.
why buy, when you can rent? I am unsure why AMD would want the burden of an added engineering force when they can just license the technology? I am confused...
I have been saying for months now that ARM is going to be the new force in processors, the scalability of the platform and its inherent advantages in power consumption are a threat to x86 in the desktop and server market. If AMD does not buy ARM next year or the year after it will be Arm acquiring AMD.
Since when do pipe dreams make good articles on here? ARM Holdings has a market cap of almost $14B (That's $14,000M) and AMD's total assets are about $3.5B of which only $606M is cash. How exactly does AMD come up with the other $10B when they are already loaded with debt?
Partners maybe... purchasers hell no.
Just another stupidity of Journalist's speculation...
On the other hand... ARM could buy AMD, but again... why? AMD is so loaded with debt it wouldn't make financial sense...
this has to be one of the stupidest articles i have ever read.does anyone do any f'n research anymore. ARMH is worth 2.5 times more than AMD is. Even if some bank was willing to finance AMD, they would be paying interest on those loans for infinity. In fact financially it would make more sense for ARM to buy out AMD, but then why would ARMH want buy a 2nd place AMD when ARM is the new Intel. Duh...
It depends on what financials you're looking at. Sure, ARM's stock price is currently trading at around $620, while AMD is at a lowly $9 a share. Big difference, obviously. But look at it a bit closer, and you'll see that AMD's market cap is more than twice what ARM's is, and AMD has nearly twice as many shares as ARM. And don't forget, AMD has a lot more cash on hand after the Intel settlement.
And here's the kicker. AMD's P/E (price to earnings ratio for non-stock geeks)is 14.22 as of today, and anything around 15 to 25 is very good. If you get to 50, you're starting to see an overvalued company. Surpass 100? Big red flag.
Well guess what? ARM's P/E ratio is 3,231.77. Just sayin'.
@mega_18
I agree with your point. I would have to say it if you didnt.
@To others
AMD does not have enough asset to buy ARM given ARM's market cap is around 2-3 times (When it comes to aquirsion the price will be a lot higher than that) of AMD PLUS AMD's current debit/asset ratio. It will not be even wise for AMD to think about.
It is not just the problem that how things will turn out for AMD to buy ARM.
1.It is first of all how AMD is going to gather enough enough liquidity asset on such a move. Do not forget AMD itself is still currently in huge amount of debits.
2. Second problem is that how would it turn out for the result when compared to the cost? Think of the oppertunity cost and gain. It is clearly not a good move given such a huge cost.
3. Given AMD's technologies, there is no reason to buy ARM either. I dont see how AMD will necessarily need ARM's technology. the only point of such a buyout is only getting the market. but except for that nothing else.
4. I do think the author have done enough research on this one.
Corrections, ARM's P/E ratio is 98.90. Copied and pasted the wrong number, all apologies. And ARM's stock price is $31 in US currency, $620 in UK.
@robwright
Stop lying using those fake informations.
1. ARMH is 2-3times of AMD . You said it reversly.
2. ARMH's P/E ratio is around 97. the value you have given is almost 3-4times this actually value.
3. Stock price don't always count of P/E ratio. For AMD's case go check yourself. It does have a hugeee list on its liabilities side compared to asset. learn more and go research accurate data. dont fooling around by keep giveing fake numbers. It dont make you look like a pro
@robwright
Just to give you more detail
ARMH(NASDAQ) mrkt cap: 14.xxB
ARM(In london) : 8.xxB
AMD(NYSE) : 6.xx
go check yourself. or you should really learn your math.
Also one things Market cap is = price * total amount of share