Earlier this month, we reported AMD would reorganize and restructure its entire graphics unit, as well as rumors that Silver Lake, a private equity firm, was interested in acquiring a substantial share of the company. We had reason to think a deal like this might well have been in the cards, but now reports indicate that the meeting may have fallen apart due to a failure to agree on a strategy that was acceptable to the private equity firm.
AMD was in talks to sell roughly 25% of itself to Silver Lake Management, but that negotiations are currently on-hold due to differences in strategy and overall cost, Bloomberg reports. AMD has good reason to push for as high a price as it can get, seeing as the company’s future largely depends on securing a lifeline until the launch of Zen, its next-generation CPU architecture that’s not expected until 2016. AMD wasn’t willing to comment on the current specifics of its situation, and neither was Silver Lake, for obvious reasons.
The fact that the talks are described as “stalled,” rather than dead, could signify that both companies still hope to head back to the table or that one is bringing pressure on the other. It’s still possible that AMD will come to an agreement with Silver Lake.
It’s not surprising to us, however, that the two companies might be having difficulty coming up with a solid plan forward. As we discussed earlier this year, any attempt to split AMD’s graphics and CPU divisions is going to run into serious trouble. The companies are intertwined in a manner that will make it very difficult to spin one side off from the other, and AMD’s ability to continue as a manufacturer of x86 chips is anything but guaranteed in the event of an external acquisition. You could, perhaps, cleave off the GPU assets entirely — but only at the cost of abandoning the CPU division.
When Rory Read resigned from AMD nearly a year ago, it looked as though he’d set the company on a path to further success. Increasingly, this appears not to be the case. Keller has left, the ARM-based K12 CPU is nowhere to be found (AMD has stated that the Zen architecture is complete, but no one is talking about K12), the SeaMicro blew $281 million in cash and did absolutely nothing for the company’s bottom line, and Project Skybridge was canceled — and with it, the 20nm version of Jaguar that might have helped breathe new life into AMD’s low-power product segments.
While Kabini and Jaguar were not huge earners for AMD, the company did a solid business in low-end processors. Unlike GPUs or big-core chips, 20nm might have been a decent fit for a low-power x86 part. Either due to limited funds or because the 20nm node couldn’t support the design, that never happened. The end result leaves AMD in a very difficult position. Zen isn’t expected to ship for revenue until Q1 2017, which means AMD has to survive the next 18 months until it begins recognizing revenue from sales in continuing results. Even if Sunnyvale delivers an excellent GPU refresh cycle in 2016, it faces an uphill fight.