- Advanced Micro Devices, Inc. (NASDAQ: AMD) is reportedly planning to buy Xilinx, Inc. (NASDAQ: XLNX) for as much as $30 billion. These are the details.
Advanced Micro Devices, Inc. (NASDAQ: AMD) is reportedly planning to buy Xilinx, Inc. (NASDAQ: XLNX) for as much as $30 billion, according to sources with The Wall Street Journal. This would be AMD’s largest deal ever.
While a number of financial analysts have been receptive to the deal as the company received a number of higher price targets, the stock price of AMD fell nearly 4% today despite a broader market increase. Xilinx’s stock price on the other hand increased over 14%. However, the stock price of AMD has increased over 2,000% ever since Lisa Su became CEO of the company in 2014.
“The deal would make sense, particularly if they were to use stock, which is likely the only way a deal could get done,” said Raymond James & Associates analyst Chris Caso via Bloomberg. “We think investors would see this as using their recently valuable stock currency to buy what’s generally considered to be Xilinx’s stable, recurring cash flow.”
Some investors may be skeptical about AMD spending a lot of money buying a company based on the company’s history of M&A. Back in 2006, AMD bought ATI Technologies for over $5 billion, only to see its stock price drop to a market value below that amount in 2007.
At the time that AMD acquired ATI deal, it was seeing tremendous momentum for a couple of years. But chip design delays and substantial overhead costs led to declines in revenue at profit under the leadership of Hector Ruiz. By the time Su took over the company, the stock price of AMD was $2 and the company’s future was in question.
Since then, AMD shutdown its expensive factories and the company outsourced a lot of work to Taiwan Semiconductor Manufacturing. Now AMD’s stock price is trading at over $83.
Xilinx’s track record has been solid. For the most recent quarter, Xilinx hit $230 million of fresh cash flow — which is $78 million more than AMD.
Analyst Ratings:
1.) Rosenblatt Securities analyst Hans Mosesmann has a “Buy” rating on AMD with a $120 price target.
2.) Wedbush increased its price target for AMD due to the “impressive” Zen 3 product launch from $85 to $100.
3.) Cowen assigned AMD a $100 price target due to the company’s performance improvement, which enables the company to have “single-thread leadership” compared to Intel
