Rumor: Microsoft In Talks To Buy AMD

Yesterday, Microsoft announced major changes related to their Mapping and Display Advertising business. In the both the cases, they offloaded business activities that are not core focus for Microsoft. In the case of Mapping, they sold Maps imagery collecting team and related IP to Uber. In the case of Display Advertising, they sold their Display ads sales and marketing organization to AOL.

Now, there is a new rumor that Microsoft is in talks with AMD for acquisition. This is not surprising given the fact that AMD is the core chip provider for Xbox and even for the upcoming HoloLens. While Microsoft might be interested in acquiring chip design expertise from AMD, I don’t know what they are going to do with AMDs traditional business of selling PC chips to OEMs. I’m sure they are not interested in selling CPUs and graphics cards to OEMs. One possibility is that Microsoft might acquire IP related to chip design from AMD which they will use in their products in the future.

The details about negotiations are unclear, just like Microsoft’s exact proposal to AMD. However, since Microsoft has $95.3 billion in cash, whereas AMD’s market capitalization right now is $1.81 billion, the software giant may buy AMD relatively easily. In fact, current value of AMD is three times lower than the company paid for ATI Technologies in 2006.

Analysts estimate that Microsoft pays around $100 for every Xbox One system-on-chip to AMD. Life-to-date sales of Xbox One are around are around 12.6 million units, which means that Microsoft has already paid AMD around $1.26 billion for Xbox One chips. The acquisition of AMD could save it around a billion per year on Xbox One chips alone. It the company develops appropriate chips for smartphones and tablets, Microsoft’s savings could be even higher.

Source: Kitguru