Analysis, Rumors

A Takeover of AMD by China’s BLX is Unlikely

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As AMD (NASDAQ: AMD) continues its to struggle with consistent profitability, rumors are consistently appearing about possible contenders to buy the company out.

The latest rumor comes from China’s My Drivers, which outlines possibility of an AMD takeover by China state-owned semiconductor firm BLX. BLX is owned by China’s Institute of Computing Technology, Academy of Sciences and Jiangsu Zhongyi Group and currently designs (it’s a fabless firm) a MIPS-based processor targeted to embedded devices.

While AMD’s GPU assets would be easily up for grabs, its x86 license is another deal. Part of any x86 license is a strict condition that it is non-transferable. This means that BLX would have to negotiate with Intel (NASDAQ: INTC) and come to an agreement that satisfies both parties. The possibility of Intel transferring the x86 license shouldn’t be ruled out entirely; Intel has come to two notable deals in China two give Rockchip and Tsinghua Unigroup access to x86 for mobile development. Considering Intel’s willingness to work with Chinese firms — its $100 million investment in Shenzhen is another example of this — it would be foolish to entirely discount a licensing play.

However such a takeover deal is unlikely to occur simply because AMD isn’t at that make or break stage quite yet. Lisa Su — AMD’s freshly minted CEO — hasn’t had time to prove herself. It would be odd, as Bernstein analyst Stacy A. Rasgon blogged, for Su to decide so early in her position to sell the company as her first act. Plus, BLX would have to make the case to shareholders — which includes Abu Dhabi’s Mubadala Development Company — that there’s more value in selling the company than continuing to push for a recovery and turnaround. AMD has not had to recently deal with aggressive activist shareholders, so there may be a desire amongst its large shareholders to see if a better return can be made pushing for a turnaround.

AMD’s stocks rose by 5% during the Monday trading day as some investors were cautiously optimistic that this rumor might have legs.