Opinion: The Upside If Qualcomm Decided to Buy AMD
The rumor mill churns on.
It seems the acquisition rumors of Qualcomm having a significant interest in AMD are calming down again, just like previous rumors of Dell wanting to buy AMD have vanished as well. But what if … Qualcomm acquired AMD? Good or bad?
In the end, the Qualcomm rumor may not be so silly. There is considerable benefit for the ARM processor maker to acquire AMD, or at least, gain more access to AMD's assets. Unfortunately, AMD is put down as the eternal second in processor race behind Intel, and AMD is believed to have considerably less value today than it did a few years ago when it put the Opteron processor in play. There is also the perception that AMD has great hardware designers who are disconnected from the company's marketing and manufacturing. Lately, AMD products have looked much better on paper and leaked roadmaps than they did in products we can buy.
Strangely enough, there is value that goes well beyond perception and beyond AMD's current market cap of about $3 billion. From a business side, AMD owns 10,525 approved patents with the U.S. patent and trademark office. AMD owns a sizable share of TSMC's 28 nm production capacity that Qualcomm so desperately needs. AMD owns graphics IP and know-how - and even if Qualcomm already owns AMD's former Imageon technology (called Adreno today), there is little doubt that Qualcomm could use more of AMD's know-how when competing with Nvidia. Imagine the implications: AMD's former CTO, Eric Demers, who was recently hired by Qualcomm, could have an interesting meet-up with AMD's leadership again.
The there is AMD's foot in the server market, which has been hurt by Intel's Xeons lately, but is nevertheless stronger than what Qualcomm has. Given the necessity for ARM to gain credibility in the server market, AMD is about as good as it gets. There is no other server processor maker that is as affordable as AMD and provides an equivalent value. As far as finances are concerned, AMD could be considered pocket change. Even if Qualcomm paid $5 billion for AMD, it could cover the cost from its reserves, which stand at about $13.3 billion in cash and marketable securities ($3.4 billion in cash alone).
For AMD, the deal may not be so bad as well. Under the umbrella of consolidation, and AMD's stronger focus on processors that appeal to the biggest chunks in the consumer market, and less on competing with Intel for the fastest processors, makes Qualcomm's consumer electronics products a good fit. Perhaps there is even some cash left to reinvigorate AMD's x86 business (Qualcomm posted a $4.26 billion profit in 2011). If Windows RT grows into a major business, both Qualcomm and AMD can win from shared resources and compete much better with Intel as well as a strengthening Nvidia.
If Qualcomm acquires AMD, it may be painful for the enthusiast and could be a death sentence for the AMD brand in the long-term, but engineering and competitiveness could benefit on both sides tremendously.