Chipmaker AMD seems to be having more and more trouble catching up with archrival Intel and even its latest Phenom II processors have failed to close the significant gap that still exists with the i7 range.
At the time of writing, AMD shares were worth $2.06, that's a twentieth of their value 3 years ago, a jaw dropping 95 percent fall.
The company is now valued at $1.24 billion and its poor outlook means that the company has been downgraded by most credit ratings firms, making it extremely difficult for the company to get cheap credit for R&D and for its own survival.
This is why AMD had to sell non-core products and create the Foundry Co with Abu Dhabi based Advanced Technology Investment Co. and Mubadala Development co. as it looks to free capital and divest from some ventures.
Back in January 2008, we wrote about about IBM's potential interest in buying AMD but concluded that it was highly unlikely. Now, given the circumstances, Apple could well be AMD's new owner by the end of the year and here are five good reasons why:
(1) AMD's Expertise and portfolio
Apple only needs three things to secure its hardware future. A stable CPU platform, a proper subsystem (chipset, video chip) and a long term relationship with a flash memory maker. For a mere $1.5 billion, AMD's acquisition would secure that through its CPU Range, its wholly owned ATI subsidiary and its joint venture with Fujitsu, Spansion.
(2) AMD is cheap
AMD is worth 20 times less than it was only 36 months ago. If you went in a supermarket and saw a pack of coke reduced from £1 to 5p, chances are that you wouldn't think twice before buying it. Same for AMD; the company is uniquely situated in the hardware ecosystem. Back in 2002, AMD ranked fifth amongst US companies in US Patents awarded with more than 1000 in that year alone. Furthermore, should Apple buy AMD and allow it to operate at a going concern, the company would still be bringing in revenue - around $5.8 billion per annum - while getting its chips for free.
(3) AMD is competitive
AMD does not produce the best processors nor the fastest video chips in the world. But in the spirit of Google, they are good enough for most tasks. They have yet to be squeezed out of the market by Nvidia or Intel and it is the amount of debt, and not their technical abilities, that is actually preventing them from proving their value.
(4) Apple is rich
Apple and Steve Jobs (in particular) are control freaks. It explains why Apple acquired P.A Semi back in April 2008 and purchased a significant chunk in Imagination Technologies in December 2008. Apple was currently sitting on a cash stash worth around $28 billion by the end of 2008. That could buy a dozen of AMDs even at a premium. Ironically, Apple buying AMD would mean that IBM could end up cosying with Apple again. IBM manufactured PowerPC processors which were used in Apple Mac computers before the transition.
(5) Killing AMD is beneficial for Apple
Let's look at the following scenario. Intel and Apple agree that the latter will buy AMD and essentially keep it to itself. Without AMD in the way, Intel can return to its true monopolistic nature, reducing research and development substantially and hiking price considerably. This means back to the old days of $1000 CPUs. This would more than make up for the loss of Apple and would also cause PC prices to go up by a margin which in turn would make Apple's computers seem more attractive.