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Xilinx Inc XLNX

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Morningstar’s Analysis

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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

Founded in 1984, Xilinx is the leader in FPGAs by market share. Its chips are critical in the performance of various devices in the communications, data processing, industrial, consumer, and automotive markets. Xilinx designs and sells chips, but it outsources manufacturing to third-party chip foundries such as TSMC.

2100 Logic Drive
San Jose, CA, 95124
T +1 408 559-7778
Sector Technology
Industry Semiconductors
Most Recent Earnings Sep 30, 2020
Fiscal Year End Mar 28, 2021
Stock Type Cyclical
Employees 4,891