AMD denies rumor that it’s mulling breakup or spinoff http://revealedtech.com/computer-system/amd-denies-rumor-that-its-mulling-breakup-or-spinoff/

Rumors about AMD’s breakup or acquisition by various companies are common, but they don’t often come from the likes of Reuters. According to the news agency, AMD is once-again mulling a breakup or spinoff. This latest review was reportedly sparked by Su’s stepping up to the CEO position and the company has reportedly been revisiting the topic.

We say “reportedly,” because according to AMD’s own spokesperson Sarah Youngbauer told ExtremeTech the following: “While we normally would not comment on such a matter, we can confirm that we have no such project in the works at this time. We remain committed to the long-term strategy we laid out for the company in May at our Financial Analyst Day.”

AMD might or might not admit to exploring such ideas, but there’s a bigger structural problem with attempting to break up the company. It’s difficult to imagine how to split AMD in a way that would preserve necessary cross-license arrangements with companies like Intel while simultaneously creating two viable businesses.

The AMD paradox

AMD is an the unenviable position of competing in markets where most agree it’s played a key role in keeping prices low, while simultaneously having competitors that few other companies would want to match. AMD’s x86 license is tied to the continued existence of the company, meaning that the x86 agreement with Intel only exists so long as AMD itself remains an independent entity. Spinning the company off into its original CPU and GPU components, however, seems unlikely.

AMD’s earnings projections for 2015 / 2016 don’t show a clean split

Buying ATI was one of the smartest things AMD ever did, even if it grossly overpaid for the Canadian company. Graphics have moved on-die, SoCs and integrated performance are the future, and AMD needs access to the GPU side of the business to continue advancing its own designs. At the same time, spinning GPUs off into an independent company would leave the newly-minted ATI fighting against a primary competitor with vastly more resources. It’s also unclear how revenues from sales of the PS4 and Xbox One would be split by the new company, or how cross-licensing on GPU tech would work when the CPU side of AMD wouldn’t be able to offer the GPU side any form of CPU licensing.

A clean spin-off, therefore, seems extremely unlikely. The two companies could breakup, but again, this would effectively cleave the CPU side of the business off completely (AMD’s graphics earnings are in overall better shape). AMD has pushed ahead with designs for new APUs, including Zen, and attempting to separate the CPU and GPU sides of the house now would only make sense if AMD had new server chips ready to roll.

Others have pointed out that AMD has done these types of splits before, but there’s a key difference between then and now. When AMD spun off GlobalFoundries, the principle concern was how it would get out of the restrictive x86 license clauses that had previously forbidden this kind of deal and who would step forward to fund the creation of a new foundry. It’s incredibly difficult to see how a spinoff now would serve any of AMD’s interests or create long-term stable revenue lines for either of the resulting firms.

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AMD denies rumor that it’s mulling breakup or spinoff