AMD in $35 Billion All-Stock Acquisition of Xilinxby Dr. Ian Cutress on October 27, 2020 6:53 AM EST
After a couple of weeks of rumor, as well as a couple of years of hearsay, AMD has gone feet first into a full acquisition of FPGA manufacturer Xilinx. The deal involves an all-stock transaction, leveraging AMD’s sizeable share price in order to enable an equivalent $143 per Xilinx share – current AMD stockholders will still own 74% of the combined company, while Xilinx stockholders will own 26%. The combined $135 billion entity will total 13000 engineers, and expand AMD’s total addressable market to $110 Billion. It is believed that the key reasons for the acquisition lie in Xilinx’s adaptive computing solutions for the data center market.
AMD CEO Dr. Lisa Su
“Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high performance computing leader and partner of choice for the largest and most important technology companies in the world. This is truly a compelling combination that will create significant value for all stakeholders, including AMD and Xilinx shareholders who will benefit from the future growth and upside potential of the combined company. The Xilinx team is one of the strongest in the industry and we are thrilled to welcome them to the AMD family. By combining our world-class engineering teams and deep domain expertise, we will create an industry leader with the vision, talent and scale to define the future of high performance computing.”
Xilinx CEO Victor Peng
“We are excited to join the AMD family. Our shared cultures of innovation, excellence and collaboration make this an ideal combination. Together, we will lead the new era of high performance and adaptive computing. Our leading FPGAs, Adaptive SoCs, accelerator and SmartNIC solutions enable innovation from the cloud, to the edge and end devices. We empower our customers to deploy differentiated platforms to market faster, and with optimal efficiency and performance. Joining together with AMD will help accelerate growth in our data center business and enable us to pursue a broader customer base across more markets.”
As part of the acquisition, Victor Peng will join AMD as president responsible for the Xilinx business, and at least two Xilinx directors will join the AMD Board of Directors upon closing.
Part of the enablement of the acquisition is AMD leveraging its market capitalization of ~$100 billion, and a lot of the industry will draw parallels of Intel’s acquisition of FPGA-manufacturer Altera in December 2015 for $16.7 billion. The high-performance FPGA markets, as well as SmartNICs, adaptive SoCs, and other controllable logic, reside naturally in the data center markets more than most other markets. With AMD’s recent growth in the enterprise space with its Zen-based EPYC processor lines, a natural evolution one might conclude would be synergizing high-performance compute with adaptable logic under one roof, which is precisely the conclusion that Intel also came to several years ago. AMD reported last quarter that it had broken above the 10% market share in Enterprise with its EPYC product lines, and today’s earnings call is also expected to see growth. AMD is already reporting revenue up +56% year on year company-wide, with +116% in the Enterprise, Embedded, and Semi-Custom markets.
The press release states that AMD expects to save $300m in synergistic operational efficiencies within 18 months of closing, due to streamlining shared infrastructure. The deal has been unanimously approved by both sets of directors, and is subject to approval of both sets of shareholders. The transaction is expected to close by the end of Calendar Year 2021.
AMD shares are currently down 5% before the market opens. A conference call will be held at 8am ET to discuss AMD’s Third Quarter Financial results and acquisition plans.
AMD's key product lines includes its Zen based processor lines such as Ryzen and EPYC, its Graphics division for Radeon and Radeon Instinct, and its semi-custom and embedded division which has been developing the latest generation of console processors for both Sony and Microsoft.
Xilinx recently entered the market with its Versal Alveo Adaptive SoCs, built as combination programmable logic plus hardened compute logic and specialized co-processors and accelerators. Its FPGA families include Spartan, Zynq, Artix, Kintex, Virtex, and Virtex Ultrascale, used in a wide variety of commercial, embedded, and enterprise markets, including the hardware used to design processors of the future.
Source: Press Release
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Spunjji - Wednesday, October 28, 2020 - linkThis is it, from my perspective. I'm not going to go all out and say it's an *obviously* good move, but it certainly doesn't seem like a bad one, either - especially given the growing threat to the high-end x86 market from ARM and GPU computation.
Revenue diversification by acquiring a company with its own solid independent track record seems smart at this juncture, and they can definitely make a case for bundling IP from both companies into the same products a few years from now.
Smell This - Wednesday, October 28, 2020 - link
Do we still use **synergies** ??
I'm thinking there is room for all kinds of side-action, here ___ beyond imagination kinda stuff. 4D-IC-bending-warp-time-string-ding-yee-duper get TsMC on line one stuff.
I.E. let Dr Su make it so.
torginus - Tuesday, October 27, 2020 - linkThis is a curiosly high valuation considering $40B NVidia paid for ARM, which is the de-facto CPU architecture in most of the embedded, and mobile world (anywhere outside of the desktop and server x86 market really). I haven't worked with FPGAs in nearly a decade, back then the two big vendors were Xilinx, and Altera (now Intel), who together controlled about 70% of the market, and there were a few other respectable companies (Actel, Lattice), and a few upstarts as well. I can't fathom how a small chunk of a somewhat niche market (FPGAs) is worth as much money, as the de-facto CPU architecture vendor.
qlum - Tuesday, October 27, 2020 - linkWhile it is true that ARM is widely known just looking at their revenue Xilinx is the bigger company.
ARM licenses the CPU-architecture and core design to third parties, as such they are far less involved in the whole process. Manufacturing, and implementing the design is still a huge part of it.
qlum - Tuesday, October 27, 2020 - linkIt's also not a buyout but rather a merger, amd were amd is valued at around 3 times Xilinx which is somewhat fair considering their current market value.
Railander - Tuesday, October 27, 2020 - linkso they're still independent companies, just with shared IP and a common goal?
ZugZug7 - Tuesday, October 27, 2020 - linkYou could argue that AMD stock has a curiously high valuation as well, since it's more than doubled in the past year. They may be bargaining with Xilinx based on say, the average stock prices of the two companies over the past year. The plan for the deal certainly was not made overnight, so the current highs of AMD likely were never considered the going rate for a conversion of shares.
Spunjji - Wednesday, October 28, 2020 - linkAs I understand it ARM isn't highly valued on the market because even as the market for their processors grows, their revenue remains relatively static due to their licensing models. Their IP is *incredibly* valuable, but that doesn't lead to a dramatic rise in profits - hence investors aren't terribly excited and the stock price has remained fairly steady.
Basically ARM stock is undervalued compared to their technical value as an IP designer, AMD are relatively over-valued because of their significant growth in profits recently (apparently investors feel confident that will continue), and Xilinx are likely somewhere between the two.
I don't think FPGAs are that niche either TBH - and as others have mentioned, the way Xilinx and ARM sell their products is very different.
trivik12 - Tuesday, October 27, 2020 - linkIts always good to expand the TAM. But Xilnix is opposite of AMD. Very little growth but profitable and in fact pays dividend. There is significant dilution as its all stock deal. But so far AMD stock is holding well. That could be due to excellent Q3 earnings. It would have otherwise gone up big after earnings.
cb88 - Tuesday, October 27, 2020 - linkFrom a stocks perspective, but take a look at the Xilinx CEOs quote and you'll see why this is happening, basically AMD is taking them in under thier umbrella and we'll see products with deeper Integration in the future as well as crosspolination that would be less likely if they were separate companies.
Also, Xilinx has already been using chiplets for years in their designs.. just FYI. And that is likely a huge deal.