nobody@[EMAIL PROTECTED]
wrote:
>> IBM only wants software businesses these days.
>>
>> Yousuf Khan
>
> Why, then, they got a new fab in East Fishkill? Just to show everyone
> they have balls? (As per fmr. AMD CEO Sanders, "real men got fabs".)
> ;-)
> If AMD's free fal continues to the point when market cap gets well
> below their book value, a buyer might emerge. Not necessarily IBM -
> there are a lot of vultures out there - but at certain price point the
> purchase might make sence even for IBM.
>
> NNN
Realistically, I still don't think a buyout is gonna happen. I think an
alternative theory is that AMD and IBM might enter into a joint-venture
of some sort. It's a bit more than the alliance that they got now, and a
bit less than a merger.
However, to play devil's advocate, here's the reasons why I think IBM
might actually want to buyout AMD. Most people think that IBM is trying
to divest itself of all of its hardware businesses and become only a
software and services company. That's actually a bit too simplistic, IBM
is really just divesting itself of low-margin hardware businesses. A low
margin business these days would be defined as anything that can be
produced in Asia with lots of little hands turning screwdrivers, and
which return just a few dollars more than it costs to make them. That's
why IBM has gotten rid of its PC business, but not its servers. It's
gotten rid of its hard disks, but not its storage systems. It's gotten
rid of its inkjets but not its networked lasers. Etc.
In this light, AMD does not fit into this category. First off, you don't
need a lot of labour to make chips (i.e. hundreds of little hands
turning screwdrivers), most of it is already automated. Labour costs and
real estate costs are minor expenses in this environment. You can put a
fab right in the middle of the most expensive sections of downtown Tokyo
or New York, or in the most remote deserts of China, and the cost to
make the chips won't vary that much. And second of all, the margins that
chips get are pretty decent.
Another issue is that it is widely believed that AMD has a poison pill
hidden inside its license with Intel. It is thought that a clause states
that Intel has the right to revoke AMD's x86 license if a buyer takes
out a majority interest in AMD. That's why AMD hasn't been bought out
after all of this time already. The only way AMD could change hands is
if the buyer also has its own x86 license from Intel, and IBM is one of
the few that has that.
Also AMD's current losses are as a result of a lack of enough chipmaking
capacity: the more chips it makes, the closer it is to break-even with
its fixed costs. Fixed costs, rather than variable costs, are the
majority of AMD's costs. So for AMD the more chips it can make within
its own walls, the better it is. If it outsources to outside places like
Chartered or even a separate IBM, it will not be contributing to paying
down its own fixed costs. However, if it is part of IBM, then IBM's fabs
are AMD's fabs, and internal capacity goes up immediately without even
needing to build a fab.
It's also been said that IBM could've taken out AMD way back in 2000
when AMD's stock price was also this depressed, but it didn't. So why
should it bother now? But back in 2000, IBM didn't know if AMD's
upcoming Opteron and Athlon chips would've been a hit, but now it knows
that AMD has some traction with its chips. Afterall, AMD was able to
technologically dominate Intel for 3 full years, from 2003 to 2006.
Also, AMD has a gotten a fully established graphics business now, which
is something that it didn't have in 2000 either. Neither CPUs nor GPUs
are yet a commodity business.
Yousuf Khan
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