Advanced Micro Devices, Inc. (NASDAQ:AMD) To Acquire Xilinx, Inc. (NASDAQ:XLNX) For $35 Billion
Advanced Micro Devices, Inc. (NASDAQ:AMD) has reached an agreement to acquire fellow chipmaker Xilinx, Inc. (NASDAQ:XLNX) in an all-stock deal valued at $35 billion. The deal paves the way for the long time Intel Corporation (NASDAQ:INTC) rival to broaden and strengthen its prospects on the development of chips for the 5G market.
The Xilinx purchase should also go a long way in strengthening AMD prospects on the development of chips for powering data centers, conversely grab significant market share. In this case, the company should be able to counter Nvidia, which is also strengthening its ambitions in the segment.
Xilinx comes into the deal, having seen its business take a significant hit in the aftermath of the U.S-China tension. Business has slowed significantly in the aftermath of its biggest customer Huawei being prohibited from operating in the U.S.
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Strengthening Competitive Edge
The $35 billion all-stock deal would be close to the proposed $40 billion acquisition of British chip designer Arm by NVIDIA Corporation (NASDAQ: NVDA). The hefty valuations underscore the great lengths companies are willing to go amid the pandemic to strengthen their competitive edge in the burgeoning semiconductor industry.
The consolidation drive is also part of companies push to stem duplicate product lines. In addition, companies have eyed mergers as part of cost-cutting strategies. For AMD, it is a different ball game as the chip giant expects Xilinx to broaden its business empire and, in return, lead to a significant increase in profits.
AMD Chief Executive Officer Lisa Su expects the acquisition to establish the company as a high-performance computing leader and partner of choice for the biggest tech companies. In the past, the company played second fiddle to Intel, which was a preferred partner for many tech companies.
The acquisition also comes on AMD’s heels reporting impressive third-quarter results, whereby profits increased 148%. In contrast, Intel woes persisted, with the company reporting a 29% decline in quarterly profits.
Stellar financial results have continued to strengthen investor sentiments in AMD. Conversely, the stock has rallied by more than 80% in 2020. While the stock traded at about $2 a share five years ago, it is now up to about $78 a share.
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