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Why Apple Should Acquire AMD
slashdotLIKES writes "CoolTechZone.com columnist Gundeep Hora has a new column up that discusses why Apple should acquire AMD and how both companies would be a good fit for each other. From the article, "After private equity groups, let's look at a more strategic acquisition. For that, Apple is the best bet. Yes, I know it sounds way too radical to be taken seriously. However, Apple could drop Intel altogether and adopt AMD for its Macintosh PCs. Sure, the transition is going to take sometime, and it would probably make Apple announce a brand new line of PCs. However, it will be well worth it. We know Steve Jobs is ruthless when it comes to making interesting deals with powerful companies. This makes AMD a perfect match. Obviously Intel isn't going to be too delighted, but other companies don't bother Jobs. We all know he's the type of executive who crafts deals on his own terms. If Intel wants to be associated with Apple, then they won't really have much of a choice."
Usually when companies craft a deal like Apple has done with Intel there is a contract that goes along with it. Term and Conditions associated with any kind of termination to that contract. On face value I doubt this would happen given that alone.
However, it will be well worth it.
Why?
AMD and Intel exist to keep each other at bay. Consumers are the winner at the end of the day because of this relationship. Meddling with that can't be good, my gut says.
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because both companies produce more fanboys than actual products.
Steve Jobs is ruthless when it comes to making interesting deals with powerful companies.
At this point, I'd call AMD interesting, but I don't know about powerful.
Apple has made some interesting deals in the past, but the whole point of the Intel switch was because Intel is the clear market leader for processors, and there's nothing out there that makes me think this is going to stop any time soon. Apple doesn't need to have something else to differentiate themselves from the standard PC market like this.
If you look at Apple's current product (Mac, iPod, soon iPhone), the market they're selling to (brand conscious consumers), and the high margin on their products, they're totally different than where AMD is competing. AMD is selling processors to price conscious consumer, with an ultra low margin. This is especially the case now that Intel is doing some very aggressive price cutting. I just don't see why Apple would enter such a market.
Also, if you look at Apple's key to success in recent years, it's their ability to design products that are "sexy". I don't see how they could leverage that while designing processors.
Stupidest technology deal of all time.
And the core competence of the combined company would be...? This would make the AOL-Time Warner deal look sensible in comparison.
AMD is doing terribly at the moment. They're seriously lagging behind Intel both in fabrication technique and chip power. Furthermore, they only reason their chips are competitive -at all- is their recent and massive price cuts.
AMD chips run hotter, slower, and require more power. Their current designs are reaching their limits, and no feasible new ones are on the horizon. Intel, meanwhile, already in the lead with the Core 2 Duo, is going to jump still further forward with Penryn.
Why would Apple move to hotter, less efficient chips? Why would Apple partner with a massively unprofitable company? Why would Apple change what they're doing at all at this point?
I love AMD, and I've been loyal to them since the first K7s came off the line, but Intel has far more potential in the near future with better R&D, better chips, and surprisingly low prices.
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If Apple owned AMD, the Apple would be stuck with slower hotter AMD chips! Right now, Apple sells better features and style to price-insensitive buyers. Right now, AMD sells cheaper slower hotter chips to price-conscious buyers. Now Steve Jobs is a great salesman, but do you really think he wants to even try to convince Apple fans that they should avoid computers with those 45nm 3.33GHz quadcore CPUs that everyone else will soon be shipping? I have my doubts...
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Longer answer: AFAIK, Intel DuoCore chips beat the crap out of AMD in the performance section, and, more importantly to Apple, in the performance-to-power-consumption section. Apple makes a lot of money from schweet laptops, and they are not about to ditch the best laptop CPU money can buy for a contender. Also, Apple iPhone is going to use ARM CPUs (Apple, if I remember correctly, was one of the founders of ARM), and Io and Behold, Intel also has an offering in that area.
In any case, the future of (personal) computing is in the laptop/mobile segment. Apple knows this, and this is why they certainly won't buy AMD.
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Terrible, awful idea. Despite popular beliefs, Apple is not a hardware manufacturer. Apple works with Chinese sub-contractors to design and manufacture all their laptops, ipods, etc. They have no organizational competency with cpu/gpu design or any chip manufacturing for that matter. Apple and AMD merging would be like gluing a cheeseburger to an airplane. In the end, the sum is no greater than its parts... it's still just a cheeseburger and an airplane.
The deal would be a disaster for Apple, because it would lose the ability to pick the IA32 CPU vendor that at a particular moment delivers the best performance in the metrics relevant for Apple. Intel and AMD has a history of leapfrogging each other, and it is always in the interest of a company to have multiple vendors competing for delivering the best product. This is much better than relying on an in-house department which may or may not perform on par with the rest of the industry.
For AMD it would be a disaster, because AMD would suddenly be in a position where it competed directly with its own customers. It would in one stroke be one of the largest producers of PC's, which would be unlikely to sit well with the rest of the industry.
[ The later reason also explain why a an Apple / Disney merger has become less likely, as Apple has become a big time content distributer. ]
"I own a crapload of tanking AMD stock, and need it to go up so I can sell it and, hopefully, make some money back."
This is a ridiculous read and I am appalled that it is on the front page... there must 100s of more worthy submissions.
Why on earth would Apple want to acquire a chip and graphics card manufacturer? Didn't Apple specifically go with Intel over AMD due to Intel's stronger road map? I don't doubt that it could have been about price too, but that leads me to my second point.
Despite Apple's position as a hardware company, a hardware manufacturer they are not. Apple designs their products, sure, but production is outsourced to others. Apple stands to benefit from not being in the chip manufacturing business. As long as Intel and AMD exist to compete against each other, Apple can play off their competition to get the best pricing. The same could be said of leading video card manufacturers NVidia, ATi/AMD, and Intel.
One would presume that should Apple acquire AMD, their Mac products would become entirely AMD/ATi based. So how does Apple benefit? Becoming their own chip supplier would certainly increase R&D, manufacturing and supply chain costs without yielding a single advantage. Apple needs to remain nimble and flexible. Right now they could drop Intel for AMD in a blink should AMD surpass Intel in price/performance and then jump right back if and when Intel takes the lead back. Should Apple acquire AMD and have AMD chips fall well behind Intel's, Apple would be sitting on a big loss with less than optimal chips in Macs to boot.
Honestly, the author of TFA doesn't know what he's talking about.
Is this before or after they buy out Nintando?
Seriously, why do people always think Apple should be buying out other companies "just because?"
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One of the main reasons Apple went with Intel instead of AMD was because Intel had much better mobile processors. Under Motorola and IBM, Apple's laptops lagged behind in development because of the lack of mobile processor development. When Apple decided to go with Intel, Intel was behind AMD a bit in the desktop market but by the time Apple converted their entire product line, Intel released their Core series and overtook AMD. To this day, AMD still lags behind Intel in mobile processors. Until that is resolved, Apple probably won't use AMD chips much less buy AMD.
Well, there's spam egg sausage and spam, that's not got much spam in it.
Come on! Only DVORAK could come up with something so lame, so off-the-wall as this!
=)
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I don't think Apple taking over AMD is a win-win idea.
I recall 3DFX's road to failure started with their acquisition of STB, letting them control all aspects of their graphics cards.
It used to be that you could keep a company going simply by consistenly producing good products for a good price and a reasonable profit. As long as the products and the price both remained good, people would buy the products and the profits would keep coming in. Obviously the products would have to be refined over time as the needs of the customer base changed, but this fundamental approach is sound.
For some reason, that's not good enough for Wall Street anymore. And so, the notion that companies must grow and expand to be "successful" has been pounded into everyone's head until nobody bothers to question it anymore. And the end result is idiotic articles like this one.
Apple produces a good product for a good price and a reasonable profit. They have been doing this for the last 25 years, ever since their inception. They have stumbled from time to time, yes, but they have survived all this time because when they were in trouble they dropped back to this simple, but time-tested, approach.
Despite this, there have been constant predictions of Apple's demise. After all, how could a company be "successful" if it didn't continuously expand, right?
One needn't expand in order to succeed. One need only provide something that others need or want at a price they can afford and at a price that brings in enough profit to get the job done. Hewlett-Packard appeared to have understood this, back when Bill Hewlett and David Packard were running things. Apple appears to understand this now, under the tutelage of Steve Jobs.
The "expand or die" mantra comes as a result of most stocks today being valued based on how much their share price will rise in the future, because for some reason paying dividends (which any steady-state business would do if it were sane, and which I believe most companies used to do) has become passe. That's not good for the company (and thus its employees and customers) in the long run because expansion is unsustainable and almost always leads to a loss of focus.
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Solvang Advanced Ploymers (http://www.solvayadvancedpolymers.com/)becasue they use a lot of plastics, and stuff. I bet there are a lot of other companies Apple could buy that happen to produce things they consume. Apple uses hard drives. Why don't they buy Hitachi? Just becasue Apple has decided to use something doesn't mean they need to buy the company.
Here will be an old abusing of God's patience and the king's English.
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Apple SHOULDN'T acquire AMD, for the simple reason that AMD products are cheap, and Apple products, well, aren't. AMD keep their place in the market by producing good cheap processors, if they sell themselves to Apple, they'll become expensive bad processors.. See where I'm going with that?
Apple is in the midst of remaking themselves as a consumer electronics company (hence dropping the 'computer' from their name). They have established a well respected brand and have considerable competence in this area. Why would they want to spend billions of dollars buying into a business (CPU design and fabrication) in which they have no experience?
[Insert pithy quote here]
If Apple bought AMD, could we see OSX working only on AMD processors? It would be neat to build my own rig and be able to install OSX on my ugly beige box legally.
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Alright, someone is making this judgement with a paintbrush when they should be using a calculator.
Apple doesn't have enough cash to buy AMD and currently has only $9.8bn in assets. They also have $6.4bn in long and short term debts. AMD would cost about $7.3bn to buy based on today's market cap. Apple would have to pay about a 20% premium to that at least, making it about $8.8bn. To then pay off AMD's debts, $9.4bn including the latest senior note offering, Apple would need that ammount of cash in excess (or at least enough to make a dent.)
The biggest reason an AMD buyout could make sense would be: A) Apple and AMD do business with each other, and thereby can be more tightly integrated so that the pair profit more than the parts. B) Apple has the cash to pay off AMD debts so that AMD can quit getting slaughtered on interest payments ever quarter. Apple could do business with AMD, but its not likely to streamline any part of the production process for either company. There is the notion that an Apple halo could be beneficial for AMD (DAAMIT). There is the unlikely possibility that Apple management would bring new life into AMD and all the sudden AMD would get twice as much innovation done and all their chips would have white substrates that collect fingerprints and come with click-wheels.
You can see where I'm going with this. Apple doesn't have the cash to buy AMD and then turn around and pay off the debt significantly. The two combined companies would together still have so much debt that instead of just AMD being at risk of bankrupcty, Apple would be dragged in as well.
That said, if you're a level 75 venture capitalist with full merits and $18bn floating around, buying AMD isn't a bad idea. The gains in interest would instantly boost AMD's earnings by hundreds of millions per year, not to mention create a stonger DAAMIT to continue exploiting the natural tendency towards duopololy in this competitive, capital intensive industry.
Buy AMD. Make it healthy. Sell it back to the street for three times what you paid in ten years. Then go find something to do with $54bn dollars.
"There are some people that if they don't know, you can't tell them." ~ Louis Armstrong
It's funny how quickly people jump on the bandwagon.
AMD has really socked Intel good in the last few years. They created AMD64, which Intel was forced to adopt. They created HyperTransport, which is a very solid and successful CPU bus platform. The Athlon's have been rocking the high end of the performance spectrum for years. AMD chips have been running faster and cooler then Intel's chips until the Core 2.
So Intel releases the Core 2, which was the product of basically ditching their whole CPU architecture for the last 10 years and going the same direction AMD has been for years. Intel has some smart people working for them, and they made Core 2 a reality very quickly. Then, Intel dumped them on the market for CHEAP. It's the first time Intel has ever sold their CPU's for such little money.
So, suddenly AMD's CPU's suck because Intel dumped their new product line on the market for very low money? No. AMD's tech is IN your Intel CPU (AMD64) and has been pushing forward the state of x86 chips for years. Their CPU's are fast and cheap, and still a good choice for anyone.
Personally I don't care which chip has the fastest version - I won't be buying the top-of-the-line from either company because they're both pretty expensive. If you compare prices, AMD is very competitive. Many of the "blogo-online" reviews of these CPU's are heavily biased towards the Core2 right now because they are good overclockers, and that's completely unfair. Most people won't be overclocking their CPU's.
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Sun buying AMD is much more likely and actually makes sense. Sun's SPARC design is at the end of its life and the company is nearing the end of its transition to the x86 architecture. Sun knows how to run a chip business, server business and software business, and wants to keep running those businesses. AMD has their chip. It's a good match.
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