Some Rational Thought on the AMD Buyout Rumors
It all seems so simple. At chipmaker Advanced Micro Devices, a sudden and unexpected sweeping away of management–starting with CEO Dirk Meyer, followed within weeks by COO Robert Rivet and Marty Seyer, senior VP for corporate strategy–has left the company looking disorganized and vulnerable, the thinking goes.
And while a search for Meyer’s replacement is underway, I’m told it could easily extend into the summer.
It didn’t take long for rumors about “takeover chatter” concerning AMD to emerge, and briefly yesterday, Dell was mentioned as a possible buyer. AMD shares traded up 4 percent for part of the day but closed down 3 cents during the regular session. Dell more or less shot down the rumor. During its earnings conference call, CEO Michael Dell, answering a question on acquisitions, said, “…we’re looking for relatively smaller sized ingredient acquisitions where we can leverage them with our substantial customer access and distribution.” With AMD currently trading at a valuation north of $6 billion with about $2.2 billion in long-term debt, it’s not the kind of target that would qualify as “smaller sized.”
There will always be rumors of this sort about the perennial number two in the PC microprocessor business. Those who trade on them don’t get something fundamental about AMD: That it would be a complicated company to buy and to own.
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