10 Reasons Why Apple Should Acquire AMD

With Advanced Micro Devices' (AMD) stock price deteriorating, could Apple (AAPL) be its white knight?

The 10 reasons and most apparent advantages of this acquisition are:

1. Apple’s best computer system architecture, operation system, user interface, and applications will combine with AMD’s most advanced and genuine multi-core CPUs and energy saving technology;
2. Apple will have better integration for its computer, particularly considering the new AMD Spider chip that combines AMD-ATI CPU and graphics in one chip;
3. With Apple’s unique position, it can still sell AMD’s CPUs and other chips to all AMD’s current customers and won’t compete directly with neither Apple’s nor AMD’s current customers after the acquisition;
4. Intel (INTC) will gain a more balanced competitor, which is healthy for the entire semiconductor industry, and even Intel may benefit from it;
5. Apple’s solid financial condition not only can support but also will speed up technology innovation; further it may change the entire business and technology landscape - from the semiconductor industry, PC industry, enterprise IT industry, and consumer electronics industry, to wireless communication industry;
6. It reduces cost for Apple and improves its profit margin;
7. It is not technically difficult since Apple has already worked out with Intel CPU;
8. It is cheap. AMD spent $5.4 billion alone to acquire graphics chip company ATI mostly by cash in June 2006;
9. The government will be glad and the deal won’t face challenge by government regulation of monopoly and competition policy;
10. It will keep AMD American.

Comments

[vincefra]

This is probably the worst analysis I ever past.
At current, Apple is in no need to have in house fabrication power for CPU's or GPU's (ATI), nor does the statement "stays American", "current financial conditions", "technical difficulty" have any value to such a merger.

I would have expected statements over "future financial gains", "platform innovation possibilities", "market penetration", "branding", ...

[peter02l]

It's 10 reasons why this Tech101 guy doesn't know what he is talking about.

[vincefra]

This is probably the worst analysis I ever past.
At current, Apple is in no need to have in house fabrication power for CPU's or GPU's (ATI), nor does the statement "stays American", "current financial conditions", "technical difficulty" have any value to such a merger.

I would have expected statements over "future financial gains", "platform innovation possibilities", "market penetration", "branding", ...

[Jon T]

What ridiculous tosh.

The one thing that Apple has always been good at, is to say NO to non-core (pun intended), distracting, pointless, ego-boosting activities, products and purchases.

That's something Microsoft has never learned. So why not suggest it to them?

[OldFart Peter]

At NeXT Computer, Steve Jobs got the company into a non-core MO-Disk project (that I was involved in), before dropping it as too expensive and non-core, given the other problems the company had. I did get two airline tickets to Europe from those frequent-flier miles, and some fun memories...

[frankz00]

Good idea on paper but the reality is that Apple will not chance ruining their relationship with Intel. Plus the Intel brand makes the average consumer feel more comfortable about buying a PC. Plus AMD traditionally has horrible yields which is why they left IBM in the first place.

[Spineless]

"AMD traditionally has horrible yields which is why they left IBM in the first place."

Oh really? Is that why they have a strategic partnership regarding process development primarily targeting SOI, which includes 32nm technology?

Actually, AMD dumped Motorola because the Motorola SOI process was inferior to IBM's. IBM helped AMD get back on track.

But to address horrible yields, AMD has had problems every now and again, but then again, when you consider that their budget for everything is just a fraction of what Intel spends, you should include that what they have accomplished is amazing considering their financial restrictions... largely due to past monopolistic activities on the part of Intel.... but I digress

[User 124298]

Are you drunk. Do you have any idea how much cash it is going to take to catch and keep up with Intel? There is a reason AMD would be a cheap acquisition. Matching Intel's investments in CPU, chipset and now graphics architecture is going to be hard enough, but too make matters worse the cost of keeping up from a manufacturing process stand point is staggering. The move to 45nm and then 32nm is going to be incredibly challenging and expensive for AMD and they are way behind. Intel is in production 45nm and has shown working silicon on 32nm. The investment Intel has in play for the 3 or 4 new 45nm plants currently under construction is more than AMD's market cap.

So, Apple's choice is an easy one. Work closely with Intel and draft off of their investments or purchase a "cheap" AMD and then tie up all of their cash (and then some probably) trying to catch/keep up with Intel with no guarentee of ever seeing a return. Hmmm

[reinharden]

You do remember AIM, don't you?

Partnering with the second tier silicon vendors at the time (IBM and Motorola) didn't really work out all that well. Why on earth would Apple want to partner with what is really the third or fourth tier silicon company?

Vertical integration doesn't work very well in the computer industry. IBM and Motorola have demonstrated that by their moves to abandon various parts of the market.


If AMD is going to survive in the long-term, it's best American hopes are private equity and/or IBM. Otherwise, it's likely going to land in the hands of one of the large Asian companies. Vertical integration *might* work for a company selling low cost PCs in China or India or possibly Korea. If that company already needed to build lots of fabs, there'd be some useful synergy.

But simply needing to buy 3% of the CPUs used *only* in the PC market does not provide sufficient synergy or scale to make it worthwhile to spend literally billions on each generation of fab.

Apple's unit run rate is currently 8 to 10 million units per year. You've got to build a new fab every 2 or 3 years to stay current. Each fab build costs more than the last but realistically you're looking at $3 to $5 billion.

For convenience, let's look at 2 years at 8 million each and 2 fabs at $4 billion each. We've just spent $500/machine simply on building fabs!


The last thing AAPL wants to do is get back in the silicon business. Even they admitted that they're primarily a software company when they got with the program and started optimizing Intel reference designs instead of designing from scratch.

reinharden

[dpc]

What a goofy idea. What value does AMD bring to Apple? None. Apple's next big play is in the enterprise, and they'll enter it with the acquisition of Sun. The only reason that didn't happen in 2007 is they didn't want to lose focus on the iPhone. I just hope they don't wait too long and allow Schwartz to lose every penny of value left.

[brewer]

You have got to be kidding. When Apple partnered with Motorola and IBM it was to have BETTER chips!

AMD is getting worse and worse. They used to be leading edge, now they are struggling to keep up.

I think Apple is FAR better off with Intel.

[User 124298]

This is basically an emotion based plea for a US company to bail out AMD. You left your real reason for last. The rest are just filler to create a top 10 list.

[Donald E. L. Johnson]

Interesting idea, but there's a reason Ford sold it's steel mill. It didn't know how to run steel and glass makers.

Apple's famous for innovating consumer products. Is that a transferable skill to computer chips and other components? I doubt it. Buzz doesn't count for much in manufacturing.

Apple outsources most its manufacturing. Does AMD?

How would Apple-AMD be valued by the market? Conglomerates generally sport low PEs because makets don't know how to value them. Thus the Tyco spinoffs and talk about breaking up Citigroup.

[SDBryan]

I think if AAPL tried something like that INTC would stop dealing with them altogether. You're not talking about a company like DELL or HPQ that sells systems with both AMD and Intel chipsets. You're talking about a company that could produce it's own microprocessors and at the same time convincing Intel that it's still a good idea to do business with them. The adoption of the INTC processors, which lowered cost and leveled the playing field hardware-wise with companies like Dell and HP, was one of the defining moments in Apple's amazing growth story over the past several years. Why would Apple now turn around and buy a company that loaded with debt and can't keep up with it's bigger rival no matter how hard it tries, just to get at a microprocessor architecture that will be duplicated and probably improved upon by Intel within the next year?

[SDBryan]

And reason #10, as some others have pointed out, is ridiculous. Protectionism is understandable, but c'mon! It's not like AMD is really any more a foreign-controlled company now that Citigroup. If Warren Buffet can buy 15% of PetroChina, why can't a Middle Eastern investment banker buy a chunk of AMD?

"Ooooh, the Saudis are gonna figure out the innerworkings of the Sempron."

[wynner1]

Apple would never consider buying AMD. If you notice, even IBM left the business of building PCs and fabricating processors. It costs Apple much less to buy chips than to make them. When they made their current deal with Intel, it was because they looked at long term roadmaps and saw that Intel's were superior to AMD. Intel's processors are faster clock per clock, use less power and generate less heat than AMD processors.

With Intel's Tick Tock manufacturing roadmaps with new architechure and new process technology alternating every other year, it would take more money than Apple readily has available to stay a year behind.

The only American company that might have a chance at profiting from acquiring AMD is IBM. If IBM did have interest in AMD, it would wait until AMD files for bankruptcy instead of taking on AMD's debt load.

None of the 10 points made any practical sense and it will never happen.

[wynner1]

Apple would never consider buying AMD. If you notice, even IBM left the business of building PCs and fabricating processors. It costs Apple much less to buy chips than to make them. When they made their current deal with Intel, it was because they looked at long term roadmaps and saw that Intel's were superior to AMD. Intel's processors are faster clock per clock, use less power and generate less heat than AMD processors.

With Intel's Tick Tock manufacturing roadmaps with new architechure and new process technology alternating every other year, it would take more money than Apple readily has available to stay a year behind.

The only American company that might have a chance at profiting from acquiring AMD is IBM. If IBM did have interest in AMD, it would wait until AMD files for bankruptcy instead of taking on AMD's debt load.

None of the 10 points made any practical sense and it will never happen.

[Steverino]

If this were seriously proposed, Stevo would be promptly escorted in a straitjacket to the local psycho ward. Other than that, it sounds pretty good to me.
Actually, I think Buffet should buy AMD. He would have to pump a lot of $ into it to make it competitive with Intel again, but that would be more American than giving away all that money. It could also save the world from the huge tariffs to be imposed by an Intel unrestrained by competition.

[anonymouse]

What a useless article.

[just_simple]

I agreed with other posters. This guy does not know a thing about tech. Apple competes against PC makers; hence, there is no way they will continue to buy AMD. It would take a lot of money to move to the next processor generation; therefore, Apple will not foolishly let its capital to be drained by owning AMD. And why choosing the second best processor while you already use the best one. So silly!

[IsThisAJoke]

Laughable for so many reasons, Apple's strong and successful relationship with Intel chief among them. I can only imagine that this guy is losing his ass on amd and trying to generate a buyout rumor.

[RickCain]

A good idea if Apple can afford it, but look what happened to AMD after it acquired ATI. Apple is becoming more of a media company than a hardware company, so an acquisition may be a step in the other direction.

[George123]

That was probably the dumbest "analysis" i have ever read. A first year economy major could destroy it in seconds. This would be the worst of all worlds for apple should they do such an insane thing as buy a chip company. Intel is the perfect partner, end of line.

[yourbestfriendintheworld]

Eleven reasons why not:

1. if AMD is acquired, it loses all right to x86 technology licensed from Intel, and Intel keeps all technology it licenses from AMD.

Okay, so I don't need the other 10. That alone means that Apple couldn't make AMD microprocessors after the acquisition. And without the microprocessor designs and manufacturing, there's nothing for Apple to acquire.

P.S. I have a hard time believing anything claimed in Tech101's bio. Unless he let one of his children ghost-write this week's article...

[barnacle999]

This is silly.