AMD to buy Xilinx for $35 billion in stock


AMD will acquire Xilinx for $35 billion in an all-stock transaction, the two companies announced Tuesday.

The transaction has already been approved by the boards of both companies and is expected to be finalized by the end of 2021. The value of the merged companies has been estimated at $135 billion.

When brought together, the new AMD will address a silicon market of $110 billion. AMD now addresses about $80 billion, while Xilinx addresses $30 billion. 

Recent combined revenues of the two companies have exceeded $11 billion annually. That level would make the combined company the eighth largest semiconductor company in the world, just behind Texas Instruments and ahead of STMicroelectronics. 

AMD CEO Lisa Su will head up the combined company of about 13,000 engineers, while Xilinx CEO Victor Peng will join AMD as president, responsible for Xilinx business and strategic growth initiatives once the deal closes.  Also, two Xilinx directors will join AMD’s board.

In a conference call, Su emphasized the growing market demand for high performance computing and AMD's advantage with the acquisition of Xilinx-invented technology including Field Programmable Gate Arrays (FPGAs) and adaptive SoCs (System on Chips).  

"By bringing AMD and Xilinx together, AMD will offer the strongest portfolio of adaptive computing products," Su said, to be able to address workloads from AI to smart networking and software defined infrastructure.

Noting that revenues doubled over the second quarter for server chips used in data centers, she said, "Data center continues to be very strategic and performs well for us. We have made tremendous progress in the server business," she said.

AMD's Rome chips have seen HPC and enterprise server growth, but fourth quarter will produce shipments of next-gen Milan chips as well, Su added . Milan-based chips are fabricated on TSMC's 7 nm process. 

Referring to AMD and Xilinx, she added: "We both have chosen the data center as our strategic focus...Both businesses are executing extremely well and Victor and I want to keep it that way," Su added. Other areas where Xilinx is strong are "very attractive," such as communications, auto, and aerospace, she said.  

"We both have a bold vision of what we can do for the industry. There is no better match in the industry than Xilinx for us," Su said.

Peng agreed that the two companies have similar cultures and  tech synergies.  "Personally, I'm all in," Peng said.

Once closed, AMD stockholders will own about 74% of the combined company and Xilinx stockholders get the remaining 26%.  AMD said in a statement it will achieve operational efficiencies of about $300 million within 18 months of closing based on the combined synergies of goods sold and the shared infrastructure of the two companies, as well as streamlining.

AMD also reported record third quarter revenues on Tuesday of $2.8 billion, up by 56%, with net income of $390 million, up by 225%.

AMD now forecasts 2020 full year revenues to grow by 41% compared to 2019 compared to a prior guidance of 32%. Fourth quarter revenues are expected to be $3 billion.

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