Is AMD for Sale?

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Perennial processor underdog Advanced Micro Devices (NYSE: AMD  ) rose as much as 5% on Monday, driven by buyout rumors.

Wedbush Securities analyst Patrick Wang notes that "there is no management team there," and he's absolutely right. CEO Dirk Meyer was forced out in January, followed by COO Bob Rivet and strategy chief Marty Seyer last week. That's a heck of a trio to lose all at once, and these departures have left gaping leadership holes. If AMD ever looked like a buyout target, this would be it.

CFO Tom Seifert is the acting CEO for now. He doesn't want the job to be permanent, and I was moved to question his suitability for even the CFO position back in 2009. Seifert's resume includes running the financial ship at Qimonda as the memory maker went bankrupt. As far as I know, he has no CEO experience. I can't fault Seifert's level of technical know-how, but AMD is a sitting duck under his leadership, especially with the departure of so many top lieutenants.

Barron's reports that Dell (Nasdaq: DELL  ) might be interested in AMD, which makes some sense. If Dell wanted to differentiate itself from Hewlett-Packard (NYSE: HPQ  ) , Lenovo, and other system-building rivals, hugging AMD tight and kicking Intel (Nasdaq: INTC  ) to the curb would certainly get that job done. But AMD has a $6.5 billion enterprise value before you start looking at buyout premiums, and a bet-the-business deal that large would leave Dell's balance sheet sorely depleted. This one's a serious long shot.

The same is true for IBM (NYSE: IBM  ) , but that combination would make more sense than a Dell deal for two reasons:

  • A stock-swap deal structure would inflict much less dilution on IBM shareholders because its float and market cap are an order of magnitude larger. IBM's large size would make it easier for former AMD investors to sell out of the combined entity if they so desired. Also, given IBM's aggressive road map to push earnings per share to $20 by 2015, it looks like the potential suitor with a strong future.
  • AMD and IBM have a long history of working together on chip designs and general processor technology.

Besides, the two acronyms look great together.

AMD says it's really looking for a new CEO (and presumably a whole management team), which wouldn't be necessary with a firm offer on the table. The company could be for sale, and the top contenders for such a deal would be IBM and Dell, but it's nothing but rumor mongering at this point.

Add AMD to your Foolish watchlist to keep up with the buyout offers -- or lack thereof.

Fool contributor Anders Bylund owns shares of AMD but holds no other position in any of the companies discussed here. Intel is a Motley Fool Inside Value selection. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (12) | Recommend This Article (4)

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  • Report this Comment On February 15, 2011, at 12:14 PM, altizar wrote:

    Cisco or Oracle would be a good choice as bidders. Both have deep enough pockets 10 Billion wouldn't hurt them that badly. Even Microsoft makes some since as a suitor.

    Oracle would probably be my pick, It'd mesh well with their purchase of Sun Micro.

  • Report this Comment On February 15, 2011, at 1:03 PM, TEBuddy wrote:

    AMD is not for sale, espectially for a paultry $10M, maybe twice that.

    AMD does not need names at the top to steer them. This is not your typical type of business, its led by intelligent people, way beyond most people's IQ. The team leads are the leaders, not some accountant or thespian at the top. AMD is a technical firm, and the most important part of such a business is the competence of its engineering leads. Most people could not comprehend the complexities these people deal with and the knowledge they posess. Management just gets in the way, and they really just need the support structure of the business, for payroll, accounts to buy materials and so on and so forth. A good leader for this company is simply a man with common sense to know what the demand in the market is.

  • Report this Comment On February 15, 2011, at 1:17 PM, TheDumbMoney wrote:

    TEBuddy: re you last line, why necessarily a man?

    altizar: if MSFT buys AMD in 2011 I will give you my personal home address and fly you to where I live so you can watch me eat my shoes.*

    *Disclaimer: Price and terms my vary. No consideration has passed or been proposed. Offer should be construed as pure hyperbole, as well as a sham offer, and also as not an offer at all. dumber may not even own shoes, and may live in a cardboard box. Try to imagine a man with a resonant voice saying this very quickly on the radio, including this sentence.

  • Report this Comment On February 15, 2011, at 1:22 PM, BuyemHoldem wrote:

    Don't kid yourself that a tech company doesn't need good guidance. The fellow that said "build a better mouse trap and the world will beat a path to your door" obviously never sold anything in his life. Just look at Burroughs in the days of IBM and The BUNCH... or Apple through the mid 90s. If it weren't for the genius of Steve Jobs, Apple would have bitten the dust too. Who knows how many tech companies have gone nowhere due to poor management. Good tech managers usually have some tech background but good techs rarely make good managers. It's not in their genes.

  • Report this Comment On February 15, 2011, at 1:27 PM, BuyemHoldem wrote:

    PS - if they were a buyout candidate, it s/b IBM or Oracle. IBM partnered on RISC to come up with the Power chip in order to smack down INTC. That didn't work. Buying AMD would. Oracle bought Sun to go head to head with HP but SPARC won't sell to the masses.

  • Report this Comment On February 15, 2011, at 1:55 PM, JAVEROA wrote:

    Do any of these companies want to risk $10Billion or more to have INTC as enemy?

    I really do not think so, or maybe Hurd being the only one who is into takeovers! But how would that complement Oracle's business?

  • Report this Comment On February 15, 2011, at 2:19 PM, BuyemHoldem wrote:

    Sam Palmisano would love to correct his mistakes of the 1970's when IBM invented the PC and let INTC and MSFT own the CPU & OS. RISC & OS2 didn't cut it. This might be his last chance.

    Sam, if you're watching, I'll gladly trade you my 41,503 shares of AMD for 8,000 shares of IBM on Tuesday.

  • Report this Comment On February 15, 2011, at 5:51 PM, rav55 wrote:

    Anything is for sale for the right price. But the AMD board is appallingly inept if they really fired Meyer for not having a tablet cpu in play. AMD is an x86 cpu and gpu design house. NOT a RISC design house. For AMD to switch the focus from laptop and desktop cpu's to paltry little tablet cpu's would have been suicide.

    The performance ceiling has been hit for the tablet unless the energy footprint increases. Or the die size shrinks.

    I think that the recent #2 and #3 management bailouts are pretty obvious. The next CEO is going to dump them anyway for his or her own people. So Rivet and Seyer resigned because the board actedly stupidly when they fired Meyer. In fact it would not have surprised me a bit to find out that they where "fired" as well.

    There is something rotten about his whole deal.

  • Report this Comment On February 15, 2011, at 6:48 PM, TEBuddy wrote:

    The MAJOR difference between IBM and APPLE is that they sell END items and services. AMD sells to OEMs, they dont need to be as savvy. They need intelligent leadership and not necessarily a salesman at the healm to tell people how to make pretty shiny things. This is a real tech company, again WAYYY different than your typical company, and I wouldnt expect normal investors to understand this much.

  • Report this Comment On February 15, 2011, at 10:13 PM, VLSIprof wrote:

    Qualcomm could be a candidate for buying AMD in order to counter Nvidia's inroads to mobile and at the same time expand to other markets. Such buyout or merger will be good for both QCOM and AMD!

  • Report this Comment On February 16, 2011, at 9:50 AM, rav55 wrote:

    ARM is going to buy AMD!!!!!

    Why not? Then they have everything. x86, RISC, then entire suite of cpu's and gpu's would be controlled by one company, from mobile to server. An ARM-AMD merger would also scare the bejeezzous out if Intel.

  • Report this Comment On February 16, 2011, at 1:45 PM, BuyemHoldem wrote:

    ARM is too small of a company. They couldn't afford it.

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