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Advanced Micro Devices Inc AMD

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AMD Agrees to Buy Xilinx and Enjoys Sharp Sales Growth in Q3; Raising AMD FVE to $67, Xilinx to $113

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

AMD reported strong third-quarter results that exceeded our expectations led by PC, server, and game console growth. The firm also announced it will purchase narrow-moat Xilinx in an all-stock transaction valued at $35 billion. We like the deal for AMD, as it is using its rich shares to fund the deal. Similarly, we’re less fond of the deal for Xilinx shareholders as, in our view, they are receiving less value than what market prices imply. We view this deal as a way for AMD to bolster its product portfolio with the leading FPGA franchise to drive growth and better diversify its revenue, as Xilinx products are complementary to AMD. Xilinx boasts a stellar margin profile with gross margins near 70%, which would be accretive to AMD’s financials. Key end markets for Xilinx include data centers, 5G, infrastructure, and automotive, which collectively would help AMD broaden its reach beyond PC and server CPUs.

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Company Profile

Business Description

Advanced Micro Devices designs and produces microprocessors for the computer and consumer electronics industries. The majority of the firm's sales are in the computer market via CPUs and GPUs. AMD acquired graphics processor and chipset maker ATI in 2006 in an effort to improve its positioning in the PC food chain. In 2009, the firm spun out its manufacturing operations to form a foundry joint venture, GlobalFoundries.

2485 Augustine Drive
Santa Clara, CA, 95054
T +1 408 749-4000
Sector Technology
Industry Semiconductors
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 28, 2020
Stock Type Cyclical
Employees 11,400