AMD will acquire Xilinx for $35 billion

After weeks of speculation, Advanced Micro Devices (AMD) confirmed Tuesday that it will acquire programmable chip maker Xilinx in an all-stock deal valued at $35 billion. 

According to AMD, the companies will have a combined total addressable market of $110 billion. AMD chief executive Dr. Lisa Su will remain at the helm of the combined company, while Xilinx CEO Victor Peng will assume the role of president, overseeing the Xilinx business. 

The companies will have a combined team of 13,000 engineers and over $2.7 billion of annual R&D investment, AMD said.

"Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry's high performance computing leader and partner of choice for the largest and most important technology companies in the world," Su said. "This is truly a compelling combination that will create significant value for all stakeholders, including AMD and Xilinx shareholders who will benefit from the future growth and upside potential of the combined company. By combining our world-class engineering teams and deep domain expertise, we will create an industry leader with the vision, talent and scale to define the future of high performance computing."

San Jose, Calif.-based Xilinx is a developer of dynamic processor technology and is the creator of field-programmable gate arrays (FPGAs), programmable system-on-chip designs (SoCs), and ACAP, a scalable compute acceleration platform for intelligent computing applications and devices. 

AMD's acquisition of Xilinx will add rapid time-to-market processor technology to its portfolio, and potentially strengthen the company's position as a rival to industry leaders such as Intel. Both AMD and Xilinx are in the data center, and Xilinx FPGAs and ACAPs will add to AMD's CPU and GPU strength, especially for workload acceleration and smartNICs, giving AMD a more comprehensive solution for emerging AI workloads, notes Gartner analyst Alan Priestley.

Going forward, AMD posits that the combined company will have one of the most robust portfolios of high-performance and adaptive computing products in the industry.

"And while our product portfolios are highly complementary, our approach to technology development is actually very similar. Both companies are laser-focused on developing leadership products based on multi-generation architectures, modular SoC designs, leading-edge manufacturing and advanced packaging technologies," Su said on a call with analysts. 

Su also acknowledged comparisons between its Xilinx acquisition and Intel's 2015 acquisition of Altera. The $16.7 billion purchase marked Intel's most significant push into the programmable solutions market and has served as the basis for Intel's programmable solutions business division. Su said its purchase of Xilinx is "a very different situation" compared to Intel and Altera, noting that both companies are already executing well in their addressable markets.

"And as you know, I haven't been big on M&A," Su said. "We're not doing M&A for M&A's sake. I mean this is such a unique opportunity there actually is no better match in the industry for us than Xilinx."

Beyond hardware, Su said the companies are also considering opportunities to combine their open-source software offerings into a unified stack at the platform and system level. 

"As we add Xilinx to the portfolio, I think we've both chosen data center as our strategic focus," Su said. "I think the investments that Victor [Peng] and the Xilinx team have made are very strategic investments in the data center for us. We have the CPU and GPU strength. Xilinx brings the accelerator capability and very strategic smart NIC technology. I think that's a strong growth vector for the combined company." 

AMD announced the acquisition alongside strong third quarter financial results. The company's revenue grew 56% year-over-year to $2.8 billion, driven by strong demand for our Ryzen, EPYC and semi-custom processors. Non-GAAP earnings were 41 cents per share. Analysts were expecting earnings of 35 cents per share on revenue of $2.56 billion. 

Broken out, AMD said Computing and Graphics segment revenue was $1.67 billion, up 31 percent year-over-year and 22 percent quarter-over-quarter. Its Enterprise, Embedded and Semi-Custom segment revenue was $1.13 billion, up 116 percent year-over-year and 101 percent quarter-over-quarter. 

In terms of outlook, AMD expects Q4 revenue to be approximately $3 billion, plus or minus $100 million. For the fiscal year, AMD now expects 2020 revenue to grow by roughly 41 percent compared to 2019, up from prior guidance of 32%.

Over this year, AMD has launched a variety of new processors including the AMD Radeon Pro 5000 gaming processors, Ryzen & Ryzen Pro 4000G, and the enterprise Epyc 7Fx2 series. AMD said the Xilinx deal is expected to close by the end of calendar year 2021. 

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