U.S.chip maker Advanced Micro Devices Inc (AMD) and Analog Devices Inc (ADI) have decided to wind down litigation related to possible infringement of semiconductor technology patents.The respective joint press release was issued last night.Image source: AMDThe companies said they have reached agreements on \"mutually agreed terms\" and are \"committed to pursuing technological cooperation to provide next-generation solutions to their customers from the communications and data center markets.\" Details of the agreement were not disclosed, and representatives from both companies have so far refrained from commenting.The issue arose back in 2019, when Massachusetts-based ADI filed a lawsuit against Xilinx Inc, now part of AMD.ADI claimed that technology used in chips that enable wireless communications and developed by Xilinx violated some patents related to converting analog data to digital data.ADI claimed that Xilinx copied its innovations when the companies collaborated on the development of another Xilinx technology.According to 2020, Xilinx denied allegations of patent infringement, and in February of this year it was acquired by AMD for about $50 million, the latter at the same time got a lawsuit.The court hearing was previously scheduled for March, but last year the court suspended the procedures related to the lawsuit due to the need for a number of formal actions related to the relevant technologies at the U.S.Patent Office.On Monday, the case was dismissed due to an agreement between the parties.
China's regulator is ready to allow AMD's takeover of Xilinx to proceed, Reuters reports. This was the last barrier to AMD's takeover of Xilinx's designs and products. The deal was announced in October 2020. The asking price is $35 billion. All countries except China had previously cleared the deal. China has agreed to it only now, putting AMD on counter conditions.
As required by the regulator, within 6 years, AMD and Xilinx products must be available in China's domestic market and not create discriminatory pressure on customers if they want to choose some products and refuse others. The merged company must also ensure the flexibility and programmability of Xilinx FPGAs, as well as compatibility of development methods with Arm-based processors. In addition, the merged company must ensure that its GPUs and CPUs sold in China will be compatible with products in the Chinese market. The regulator reserves the right to inspect the merged company in any way it can to ensure compliance with the requirements. After 6 years, the merged company has the right to request a review of the terms of this agreement, but the regulator reserves the right not to change anything. If AMD and Xilinx agree to the terms put forward, the deal will be immediately approved in China. AMD's purchase of Xilinx was a kind of response to Intel's earlier takeover of FPGA developer Altera. FPGAs are expected to greatly expand the potential of central processing units, whose further development is hampered by the proximity of technological barriers to production. New technological processes can no longer increase the performance of processors, and they need new functional solutions. Progress promises the integration of FPGAs into processors or platforms.
AMD executives just have to report on the results of last year the first of February, and Gartner experts have already determined that at the end of the reporting period the company increased revenue by 64.4 %. Piper Sandler experts believe that further AMD revenue growth will slow due to similar processes in the PC market, as well as the impact of the deal with Xilinx. Since the beginning of the year AMD shares fell in price by 11 %.
AMD shares ended yesterday's trading down 5 % to $121.89, and Piper Sandler representatives determined that their fair value does not exceed $130. According to analysts, over the next two quarters, AMD's financial performance will live up to investors' expectations, but further this cannot be guaranteed. Demand in the PC market will stop growing at the previous pace, and this will inevitably affect the company's business. The second factor, which can worsen the dynamics of AMD's financial performance & ; is the upcoming deal on the absorption of Xilinx. In the current year the latter will gain about $4 billion, as investors expect, increasing the corresponding figure by a modest 10 %. On the background of AMD's former dynamic performance, this is quite small, and the merger with Xilinx will be able to slow down the revenue growth of the entire company & ; to 22 % by the end of 2022, for example. At the level of operating profit margin, the deal with Xilinx won't give AMD much momentum either; it's unlikely to exceed 26 % in the first year. Analysts at Piper Sandler also expect a correction throughout the market of shares of companies in the technology sector with a large price-to-earnings ratio per share. In the case of AMD this ratio exceeds 37, and therefore leaves sufficient margin for a possible rate correction.
The countdown to the end of 2021 is already measured in hours, so AMD and Xilinx saw fit to say in a joint statement that they didn't have time to get regulatory approval for the merger deal, which was announced in late October 2020. The parties expect everything to be approved in the first quarter of 2022.
According to the companies, the progress of the alignment is unstoppable, and they still expect a favorable outcome. No changes in the terms of this deal are expected. It is important to note that at the first stage of the exchange of shares estimated the transaction amount of $35 billion, which AMD would conventionally transfer to Xilinx shareholders, but since then, the former's share price has strengthened markedly and now the cash equivalent of the deal reaches $62 billion. At least, this result gives the conversion of 247 880 415 Xilinx shares into AMD securities at a ratio of 1.7234 per piece at a rate of $145.15. Yesterday's trading ended with AMD shares down 2.1 %, but after the session closed, they increased in price by 0.15 %. At the same time Xilinx shares fell in price by 3,6 %. In fact, the last stage of approval of the deal are negotiations with Chinese regulators, which are wary of such mergers. Now they have until the end of the first quarter of 2022 to issue their opinion.
Chinese regulators may approve three deals by the end of December, including the takeover of Xilinx by AMD
China's antitrust authorities have long considered the Mellanox takeover deal by NVIDIA, but eventually approved it, so the latter's representatives expressed confidence that there would be no problems with the Arm purchase in this area either. In the near future, Chinese regulators may approve deals between AMD and Xilinx, GlobalWafers and Siltronic, as well as agree to sell Intel's solid-state memory business.
South Korea's SK hynix will be the buyer of the latter, which will bring it closer to the second place in the global solid-state memory market. Silicon wafer manufacturer GlobalWafers, which is buying rival Siltronic, is also pursuing the task of enlarging its business. AMD said at a recent Credit Suisse conference that it hopes to get approval from Chinese authorities to buy programmable die developer Xilinx by the end of the year. That will be the last approval on the way to finalizing a deal that will not require the buyer to incur direct material costs, as the companies will eventually swap their own shares. At the same time, the deal between NVIDIA and Arm has run into opposition from U.S. officials, who will seek its cancellation through the courts. Arm has a subsidiary in China, so local antitrust officials could look at the deal with great bias, but now it is clear that the most resistance will arise in the U.S. and British directions, and the word of Chinese officials in this matter will not be decisive. Sources among stock market participants say that the restructuring of the Chinese antitrust authorities will allow them to make decisions faster, and as a result, the deal between AMD and Xilinx will be approved within the planned time frame.
According to the resource Seeking Alpha, the Chinese regulator has begun the second phase of studying the deal on the purchase of American developer of programmable logic integrated circuits Xilinx by AMD for $35 billion. The deal is being studied by the State Administration for Market Regulation (SAMR) China.
The deal between Xilinx and AMD was previously approved by the UK Competition and Markets Authority (CMA). The agreement between the two companies cannot be signed until it has been approved by international regulators dealing with fair competition in the market. SAMR usually conducts reviews of such cases in three phases. The duration of the first phase of the investigation is 30 days, the second & ; 60, and the third & ; 90. At the end of each phase the regulator decides if it is ready to approve the transaction or if the next phase of review is necessary. The Chinese regulator simply wants to take a closer look at the potential agreement and its possible impact on market competition before making a final decision. Various sources report that AMD remains confident that the deal with Xilinx will be approved and closed by the end of this year. Shareholders at last April's meeting also voiced their support for the deal; According to AMD, the merger with Xilinx will create 13 thousand additional jobs, while the company will be investing over $2.7 billion annually in new developments department. Xilinx, in turn, will bring its expertise to AMD and help it expand in machine learning technologies.
British Competition and Markets Authority (CMA) has decided not to conduct the second phase of investigation into AMD's $35 billion acquisition of U.S. developer of integrated circuits for programmable logic Xilinx, thereby approving the deal. Seeking Alpha reports about it, with reference to the statement of CMA, published on its official site.
Advanced Micro Devices expressed its desire to acquire Xilinx last October. The deal was approved by shareholders of both companies in early April of this year.In May, CMA announced that it was investigating a deal in which AMD would take over Xilinx through a share swap. And although the agreement will not require AMD to make direct cash investments, the deal is nominally valued at $35 billion. The first phase of the CMA investigation was to be completed by June 30. Shares of both companies rose on the news that the British regulator had no questions for AMD and Xilinx. The Federal Trade Commission and the U.S. Department of Justice also did not object to the agreement between the two companies. So AMD and Xilinx only have to get support from Chinese regulators. Earlier AMD chief executive Lisa Su said the purchase of Xilinx will strengthen AMD's position in high-performance computing. Combining our world-class engineering teams and extensive subject matter expertise, we will create an industry leader with the vision, talent and scale to shape the future of HPC».
At the end of October AMD and Xilinx announced that they will merge their assets by means of stock swap without using any cash. AMD will hold 74 percent of the capital stock in the merged company and Xilinx will hold 26 percent. This week the deal was approved by the meetings of the shareholders of both companies, now the word is left for the antitrust authorities of different countries.
Image source: AMD
When the deal was announced, it was reported that the capitalization of the merged company will reach $135 billion. Although the merger of the companies will not involve any costs in monetary terms, the nominal amount of the deal is estimated at $35 billion. After the takeover of Xilinx, AMD could become the fourth largest chip developer in terms of revenue. The joint company will be headed by Lisa Su (Lisa Su), the current head of Xilinx Victor Peng will become president of AMD, responsible for the direction of programmable matrixes, the development of which is now specializing Xilinx. Seventh April were held shareholder meetings of both companies, and now the decision on their impending merger has the support of holders of AMD and Xilinx. AMD CEO Lisa Su said: «The Xilinx takeover marks the next step in making AMD the best strategic partner for many major technology companies, as it makes it an industry leader with the strategic vision, talent and scale needed to realize future innovation». Xilinx CEO Victor Pan added: «The Xilinx team is one of the strongest in the industry, and we are excited to join AMD. We share an innovative culture with the company, the collaboration will allow us to accelerate our data center business development and reach a wider range of customers as part of the merged company». The deal has yet to be approved by antitrust authorities in several countries, and the parties still expect the merger to be completed by the end of 2021.
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