Technoglitch
Core Member
For months now Microsoft has been rumored to have been making a move to acquire chip maker Advanced Micro Devices (AMD). More recently on Friday shares of AMD spiked as much as 13% after reports circulated that Microsoft was already holding serious negotiations to work out an acquisition agreement with AMD.
AMD currently has a total market capitalization of only $1.57 billion. Considering that Microsoft has cash reserves of $5.6 billion, excluding short term investments, the price comes at a relatively cheap bargain. Also a deal would likely be financed by both cash and stock based compensation. But the acquisition is bound to bring about certain costs that are hard to overlook.
For Microsoft, the acquisition would allow control over its leading supplier in its console production, while saving costs in the process. It would also be able to advance further in its PC graphics segment by creating Graphic Processing Units (GPU) to promote its DirectX 12 and beyond.
Despite the advantage from vertical integration, the takeover will create certain problems as well for Microsoft. With regards to Intel, a primary corporate partner to the software giant, the move would be bad news. Intel is in direct competition with AMD, and Microsoft’s takeover would pit it against Intel, threatening a 20 years long collaboration. Similar case can be made for Nvidia, which is dependent on sales to Windows customers. Besides AMD is also sole supplier to Sony with regards to its PS4, which after acquisition would put Microsoft in that position, a dangerous scenario for Sony which is sure to prevent this legally or otherwise.
Does Microsoft Corporation Acquiring AMD Makes Sense?
AMD currently has a total market capitalization of only $1.57 billion. Considering that Microsoft has cash reserves of $5.6 billion, excluding short term investments, the price comes at a relatively cheap bargain. Also a deal would likely be financed by both cash and stock based compensation. But the acquisition is bound to bring about certain costs that are hard to overlook.
For Microsoft, the acquisition would allow control over its leading supplier in its console production, while saving costs in the process. It would also be able to advance further in its PC graphics segment by creating Graphic Processing Units (GPU) to promote its DirectX 12 and beyond.
Despite the advantage from vertical integration, the takeover will create certain problems as well for Microsoft. With regards to Intel, a primary corporate partner to the software giant, the move would be bad news. Intel is in direct competition with AMD, and Microsoft’s takeover would pit it against Intel, threatening a 20 years long collaboration. Similar case can be made for Nvidia, which is dependent on sales to Windows customers. Besides AMD is also sole supplier to Sony with regards to its PS4, which after acquisition would put Microsoft in that position, a dangerous scenario for Sony which is sure to prevent this legally or otherwise.
Does Microsoft Corporation Acquiring AMD Makes Sense?
this acquisition is yet to be completed 
