Private equity to buy 20 per cent of AMD

[Arachnotronic]

What does "20 percent of its stake" mean exactly?
They are buying 20% of the shares on the market, or AMD is selling them private shares, or something else?

If they were to buy 20% of the shares on the market, AMD wouldn't see a dime of that money.

 

[erunion]

So AMD is bringing in new equity and separating GPUs into their own division.

Obviously, the recent rumor that AMD were pursuing investments and the possibility of spinning off parts of the company was 100% correct.

In other words, the "Zen will save AMD" mindset isn't holding up. AMD's situation is deteriorating too quickly for them to simply wait until the end of 2016.

 

[mrmt]

Why would they want to own 20% of a turd?

That depends, even you would in some conditions. What really matters is what valuation the deal is being processed and what strings the new investor will be able to attach to the company.

For example, a deal where we would see a spin off of the graphics division, where it receives the full amount of the cash infusion in order to follow Nvidia's lead for the time being and the investor get to appoint one or two directors on the new BoD seems a good proposal to me, especially if we apply a discount to AMD's current valuation.

But any deal valuing AMD on par with the current market value and/or where that masterly incompetent BoD of them still retains power over the entire company is just a very bad value proposition.

 

[Good_fella]

That's why they delayed Zen? Try to fix it after money infection? :awe: ()

https://www.reddit.com/r/pcgaming/comments/3kdq3k/amds_zen_will_be_late/

 

[BUnit1701]

Exactly. I am so sick of the "AMD is the next apple" wishful thinking.

I am so sick of the "AMD is already dead, why are they even trying" hateful thinking, but that doesn't slow any of the usual trolls down.

 

[Zor Prime]

I am so sick of the "AMD is already dead, why are they even trying" hateful thinking, but that doesn't slow any of the usual trolls down.

It's been going on for DECADES, too.

 

[pablo87]

If. What does this do to Mubadala position?

Puts them in slightly secondary position but effectively muzzles them. Here's why.

The BoD is probably at semi panic stage now, worrying about their reputation. They probably don't care about anything else.

The company needs money (which Mubadala has) but it also needs to be turned around (which Mubadala is clueless). Whereas private equity does both - that's what they do.

Obviously the target is spinning off ATI (which I said should happen 4 years ago) the Radeon reorg could not be more clear on this. Which makes perfect sense - at some point that spin off will have a market cap of $5B+.

You can bet the investors are negotiating hard, which in the end the BoD will give them almost whatever they want (though the spin will be congratulating the BoD on a great deal).

A lot of winners from this esp. GPU employees. The big loser will be Nvidia. x86 will probably see some major cuts as well.

 

[krumme]

Puts them in slightly secondary position but effectively muzzles them. Here's why.

The BoD is probably at semi panic stage now, worrying about their reputation. They probably don't care about anything else.

The company needs money (which Mubadala has) but it also needs to be turned around (which Mubadala is clueless). Whereas private equity does both - that's what they do.

Obviously the target is spinning off ATI (which I said should happen 4 years ago) the Radeon reorg could not be more clear on this. Which makes perfect sense - at some point that spin off will have a market cap of $5B+.

You can bet the investors are negotiating hard, which in the end the BoD will give them almost whatever they want (though the spin will be congratulating the BoD on a great deal).

A lot of winners from this esp. GPU employees. The big loser will be Nvidia. x86 will probably see some major cuts as well.

I perfectly remember pablo tons of credibility for that. Even if you perhaps play a part in this. Lol.
Where does this potentially leave gf ?

 

[ShintaiDK]

Obviously the target is spinning off ATI (which I said should happen 4 years ago) the Radeon reorg could not be more clear on this. Which makes perfect sense - at some point that spin off will have a market cap of $5B+.

How would ATI ever be worth 5B again? Its a rapid shrinking market with no hope besides IP licensing at best.

 

[frozentundra123456]

Exactly. Market cap is now 1.4B. So spinning off ATI, or whatever they call it, will cause it to triple in value??? Sure............

 

[Fjodor2001]

Intel should buy AMD's GPU division to get some proper iGPUs. After all, Intel spent an insane $16.7B on acuqiring Altera, so $5B for AMD's GPU division would be very cheap in comparison.

 

[MiddleOfTheRoad]

"DX12 will save AMD" or "AMD will win in PC because console APUs" is wishful thinking at its finest.

Well, Private equity clearly sees a financial upside -- they don't invest for charity.

 

[dark zero]

Intel should buy AMD's GPU division to get some proper iGPUs. After all, Intel spent an insane $16.7B on acuqiring Altera, so $5B for AMD's GPU division would be very cheap in comparison.

If Intel buys the GPU AMD division, the rest of AMD will be dead.

And yeah, AMD will be nothing, even the console makers will leave AMD alone....

And if that is true... Poor Nintendo... Since MS is leaving their console division and Sony will rethink the future of their console if AMD dies...
Nintendo console will be DOA

 

[ShintaiDK]

Well, Private equity clearly sees a financial upside -- they don't invest for charity.

Did anyone invest yet? Stocks doesnt show it.

But again the source is SA.

 

[Aristotelian]

Exactly. I am so sick of the "AMD is the next apple" wishful thinking.

He was using that as an example to demonstrate a point - that this "news" may indeed be a good thing for AMD. The question here is - why are you so 'sick' of seeing people hope that AMD turns around, and becomes a more competitive force in the CPU/GPU realm?

I think the new processor from Apple is a bit of a wake up call to Intel - per other threads in this sub-forum. I'd love to see the way in which technology could advance if somehow AMD, Apple and Intel had to compete with one another. I don't see why such a desire on my part should make anyone sick over it.

 

[jpiniero]

Well, Private equity clearly sees a financial upside -- they don't invest for charity.

This is true. You're still talking about a company that has a good amount more debt than their market cap, and their main product's sales are in the toilet. Maybe they have an angle that most people aren't thinking about. I guess we will have to see.

 

[ShintaiDK]

Intel should buy AMD's GPU division to get some proper iGPUs. After all, Intel spent an insane $16.7B on acuqiring Altera, so $5B for AMD's GPU division would be very cheap in comparison.

We have to see the spinoff first, tho after the management changes it raised the probability significantly.

But its not going to be 5B$. More like 500M-1B$ depending on cash/debt.

 

[Fjodor2001]

No point in selling the GPU division for that little money. Maybe Intel can get a licensing deal at that level though, with either AMD or nVidia. AMD will need their GPU division for their next gen Zen based APUs and consoles, unless they get some serious money for it.

 

[Arachnotronic]

Intel should buy AMD's GPU division to get some proper iGPUs. After all, Intel spent an insane $16.7B on acuqiring Altera, so $5B for AMD's GPU division would be very cheap in comparison.

Price is what you pay, value is what you get.

$5 billion for a business that has consistently been unable to turn a profit is hardly cheap.

Also, Intel's iGPUs keep getting better; I think by the time we're at Cannonlake, Intel will have very clear leadership in iGPU performance across the various tiers, if not by Kaby Lake.

 

[ShintaiDK]

No point in selling the GPU division for that little money. Maybe Intel can get a licensing deal at that level though, with either AMD or nVidia. AMD will need their GPU division for their next gen Zen based APUs and consoles, unless they get some serious money for it.

When the company is only losing money and burning cash they are not in control of the future events. We already know the Q3 will be in the 100M$ loss again for AMD. AMD lost its fabs and ended up with the WSA for the exact same reason. No money.

AMD dont need a GPU division. They only need a licensing deal to continue without ATI.

 

[Fjodor2001]

It's also what you can make of it yourself, once the asset is incorporated into the new company. A small company may have tech that they cannot make much money on themselves, but once that tech is used by another company, the tech can be much more valuable. That's why we often see big companies acquiring smaller ones for a price that is much higher than what it is valued to at the stock market.

If AMD's GPU division can produce iGPUs that are better than Intel's current ones, that can have a lot of value for Intel, justifying a high price. Add to that the SW driver experience from AMD.

But then there is also the anti-trust law issue. So maybe it would be better for Intel to just license the iGPU as an IP block from AMD or nVidia.

 

[mrmt]

In other words, the "Zen will save AMD" mindset isn't holding up. AMD's situation is deteriorating too quickly for them to simply wait until the end of 2016.

AMD is in the middle of a death spiral. Their only viable business is the console contracts which is past the peak volumes and margins, the rest of the products are just plain inviable. Given how much cost optimized Skylake ended up being, I think we can expect AMD CPU business to collapse well before Zen reaching the market. AMD will need to do some heavy financial engineering to keep the CPU division running until 2017, on top of further cuts that should be well on its way, and I don't see a viable CPU regardless of Zen being viable or not, because things like brand and supply chain will be destroyed by the time Zen arrive.

 

[Arachnotronic]

It's also what you can make of it yourself, once the asset is incorporated into the new company. A small company may have tech that they cannot make much money on themselves, but once that tech is used by another company, the tech can be much more valuable. That's why we often see big companies acquiring smaller ones for a price that is much higher than what it is valued to at the stock market.

If AMD's GPU division can produce iGPUs that are better than Intel's current ones, that can have a lot of value for Intel, justifying a high price. Add to that the SW driver experience from AMD.

But then there is also the anti-trust law issue. So maybe it would be better for Intel to just license the iGPU as an IP block from AMD or nVidia.

Intel's iGPUs seem to be doing the job just fine, though...

 

[Ajay]

When the company is only losing money and burning cash they are not in control of the future events. We already know the Q3 will be in the 100M$ loss again for AMD. AMD lost its fabs and ended up with the WSA for the exact same reason. No money.

Well, at the time, as I think we all know now, AMD was doing well - then Ruiz & Meyer came up with plans (like delaying 65nm, buying ATI and spinning off fabs with horrible terms) that started the death spiral. That and Intel introduced Core2 (which AMD may have been able to deal with if it hadn't sunk it's feet in cement first).

AMD dont need a GPU division. They only need a licensing deal to continue without ATI.

Very true. MRMT had said b/4 that the GPU division was the only part of AMD worth saving. If this rumor is true, I wonder if Silver Lake is buying out the GPU division. Gives SL something to work with where they think they can add value (operational efficiency & execution) and it give AMD money to stay in the CPU business. Just a thought, IMHO.

 

[Arachnotronic]

Well, at the time, as I think we all know now, AMD was doing well - then Ruiz & Meyer came up with plans (like delaying 65nm, buying ATI and spinning off fabs with horrible terms) that started the death spiral. That and Intel introduced Core2 (which AMD may have been able to deal with if it hadn't sunk it's feet in cement first).



Very true. MRMT had said b/4 that the GPU division was the only part of AMD worth saving. If this rumor is true, I wonder if Silver Lake is buying out the GPU division. Gives SL something to work with where they think they can add value (operational efficiency & execution) and it give AMD money to stay in the CPU business. Just a thought, IMHO.

Why wouldn't AMD just wind down its CPU business and go all-in on the GPU biz organically, then?