AMD Shoots Down Rumors Of Potential Breakup Or Spinoff
AMD reached out to us with a statement today in which the company completely denied the premise of a company breakup as was reported by Reuters this past Friday. AMD Spokesperson Sarah Youngbauer issued the following statement :
“AMD provided official confirmation that we have not hired an outside agency to explore spinning-off/splitting the company. We remain committed to the long-term strategy we laid out for the company in May at our Financial Analyst Day, which encompasses all parts of the business.”
Our Take :
In many ways the rumor was pretty hard to swallow to begin with, it made very little sense and was practically unrealistic in today’s world. AMD’s microprocessor business, both the enterprise and client sides of it, has grown inseperable from its graphics branch, one could simply not exist without the other. AMD’s long standing commitment to the philosophy of integration and its continued investment in the idea of the APU and microprocessor heterogeneity underlines this deeply intertwined relationship between both disciplines.
Below you will find the original story as it was published on June 20.
AMD Considering A Breakup Of CPU And Graphics Businesses – Potentially Spinning Them Off As Separate Entities
In an exclusive report published by Reuters, sources close to AMD claimed that the company is reviewing the possibility of a breakup. According to the report the internal discussions are preliminary and no decision has been reached, however the sources claim that all possibilities are being explored.
AMD has also reportedly hired a consulting firm to review the various options for a breakup or a potential spin-off. One of the scenarios under review separates AMD’s enterprise and CPU business from its graphics and licensing business. Essentially splitting the company into the two disciplines that made AMD what it is today, CPUs and graphics. The old AMD and ATi in essence.
AMD Considering A Breakup Of Enterprise And Graphics – Potentially Spinning Off A Business Division
“One option under consideration is separating AMD’s graphics and licensing business from its server business, which sells processors that power data centers, one of the people said. ”
“AMD had explored such a move in the past and decided against it, the people said. Su, however, who took over as CEO last October, judged that there is merit for the company to at least consider such a possibility again, the people added. There is no certainty that a split or spin-off will occur, the people cautioned.” @Reuters
AMD completed the merger with ATi, the Canadian graphics company, back in 2008. The vision as AMD put it was “fusion”. To integrate high performance, class-leading graphics into the company’s microprocessors. AMD was very successful in this regard and the company continues to lead in graphics performance to this day against its much larger rival Intel. The first product born out of this vision was Llanno. Which was introduced in 2011 and is the company’s first mainstream APU, Accelerated Processing Unit.
Since then however AMD has introduced five more generations of APUs and used this integration philosophy to score its biggest win yet which was the PS4 and XBOX ONE console sweep. Both of which are based on this APU ( CPU + Graphics ) integration technology and philosophy. The company did not stop there and founded the Heterogeneous System Architecture, or HSA for short, foundation. Last year I covered how the entire industry is shifting towards this philosophy of integration in a comprehensive two part editorial piece.
At this point one could easily argue that both the microprocessor and graphics sides of the company have grown inseparable. AMD simply invested too much in this philosophy and its entire future roadmap relies very deeply on this idea of integration. Thus separating these two very different yet intricately intertwined branches could prove impossible, or could it ?
Currently AMD has two major divisions : GC ,Computing and Graphics, as well as EESC ,Enterprise, Embedded and Semi-custom. The last of which is responsible for the console sweep that earned the company some financial breathing room in a desperate time.
I do think that a plan could be drawn in which those two entities can be separated into what they were before the 2008 merger. However I have no doubts that the more enterprise focused EESC branch would still rely on the client focused GC branch’s technology and Intellectual property, and vice versa. Although a licensing deal can be established, which gives both entities access to the technology and IP they need to continue to innovate. In fact AMD’s Devinder Kumar even confirmed last month that AMD’s cross-licensing deal with Intel won’t impede any possible, mergers, acquisitions or restructuring efforts. Although there’s a far more important question that we should be asking, and that’s how would this breakup benefit the company ?
Quite frankly, it’s quite difficult to answer that question. I’d imagine that it would inflate operating expenses simply because the work that is now shared would have to be doubled. However it may also give the two branches of the company a more razor edged focus to innovate. But when it comes down to it, I’d personally would argue that if a breakup is warranted now, then a merger 7 years ago was not.
Share your thoughts in the comments below and as always stay tuned for the latest.