System Builders: AMD Split-Up Reports Don't Add Up

Chip giant Advanced Micro Devices is in the early stages of considering whether it should split in two or spin off one of its primary businesses, according to a Reuters report.

AMD refuted the reports, which claimed the Sunnyvale, Calif.-based company is looking at separating its graphics and licensing business from its server business as one option, in an effort to better match rivals in the semiconductor industry like Intel.

"AMD provided official confirmation that we have not hired an outside agency to explore spinning-off/splitting the company... We remain committed to the long-term strategy we laid out for the company in May at our Financial Analyst Day, which encompasses all parts of the business," said spokeswoman Sarah Youngbauer in an email to CRN.

[Related: Unleashing The Fury: AMD Takes Wraps Off Radeon R9 Fury Graphics Cards At E3]

AMD, which supplies microprocessors based on the x86 microarchitecture and jointly provides graphics processing units, has prided itself in its accelerated processing units (APUs), which combine the performance of multicore processors and AMD Radeon graphics technology on one chip to enhance gaming, videos and multitasking features on PCs.

If true, rumors of the spin-off could mean that the company with a market capitalization of $2 billion would separate its data center-based processors and graphics department.

But system builders like Todd Swank, senior director of product marketing at Equus Computer Systems, a Minneapolis-based custom system builder, said the idea of AMD splitting up wouldn't make sense, as the company's strength is in its APUs.

"I find it hard to believe that this would go through," said Swank. "The fusion of its CPU and graphics together on the same silicon seem to be a strategic advantage of AMD, so I don't see how either segment would benefit from not having the other. You feel for AMD, as it has always had a long history of being a scrappy competitor despite going against some of the toughest competition in history, like Intel and Nvidia. But I don't know if this would get AMD back on track."

AMD's cross-licensing agreement with Intel, which granted AMD the right to manufacture high-performance x86-compatible processors in 2009, could cause another challenge for a potential split-up, said AMD system builders.

"What I find interesting is how AMD’s x86 cross-licensing agreement with Intel could affect or limit the options AMD has in this area," Andrew Kretzer, director of sales and marketing at Bold Data Technology, a Fremont, Calif.-based system builder, said in an email. "It’s very clear to me that AMD will look very different a year from now, turning their focus onto semi-custom and embedded."

While AMD's Windows-compatible APUs are one of the company's prized products, it still faces intense competition on the graphics end from Nvidia and in the CPU market from vendors like Intel and ARM.

Jack Narcotta, devices analyst at Hampton, N.H.-based Technology Business Research, stressed that AMD is facing widespread changes in the semiconductor industry, particularly with the struggling PC market and emergence of mobile devices.

"You have Intel talking about a rough PC forecast, and you also have new markets like the Internet of Things and other initiatives," he said. "AMD is asking itself how it can stay ahead with these new issues, and survive in a marketplace that is changing so much, so exploring these options makes sense."

If rumors of a split-up prove true, AMD would join several other large vendors like CSC, Hewlett-Packard and Symantec to break their companies up in response to shifting trends in the technology industry.

PUBLISHED JUNE 22, 2015