Is a Sale in AMD’s Future?

Even though Advanced Micro Devices (NYSE:AMD) is one of Silicon Valley’s oldest chip manufacturers, the company has struggled to remain profitable in the semiconductor market that is dominated by Intel (NASDAQ:INTC).

Currently, only Fujitsu’s (FJTSY.PK) Stylistic Q572 tablet runs on one of the company’s chips.

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Rumors have circulated within the industry that a merger or an acquisition may be in the company’s near future, yet many analysts question whether a third party would be interested in acquiring its CPU business, given Intel’s advantage.

However, the persistent rumor gained some credence Tuesday afternoon when AMD announced it had hired JPMorgan Chase (NYSE:JPM) to “explore options,” which may include a potential sale.

Subsequently, shares spiked almost 9 percent, to $2.19, in afternoon trading. The company’s stock price has decreased more than 60 percent this year to date, lowering AMD’s market value to $1.4 billion. In comparison, the company’s long-term debt and capital lease obligations amount to $2 billion.

Reuters reported that sources with knowledge of the company said that an “outright sale of the company is not a priority,” but the sale of its extensive patent portfolio could be an option. However, if the company continues to struggle in the industry, which is increasingly focused on mobile devices rather than traditional PCs, a sale may be considered more seriously. According to the publication, analysts are “concerned it may not find new markets for its chips in time to reverse a declining cash reserve.”

As of now, AMD is laying off engineers.

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