Microsoft May Buy AMD

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Now here’s something to get those conspiracy juices flowing. Microsoft may acquire AMD (Advanced Micro Devices) in the not too distant future. Think of it as Microsoft’s attempt to bring around the company’s chip design operations.

Image taken from http://www.vrworld.com
Image taken from http://www.vrworld.com

Microsoft has been in the Game Console business for the last 10 years or so and even had their own division to manufacture their chips for their devices, mainly gaming consoles. Although this division was responsible for manufacturing certain chips, they have actually used chips designed by AMD and Nvidia for the Xbox One and Zune player. So as far as Microsoft is concerned, they seem ill-equipped to come up with an actual chip that can rise above the competition, thus making their chip operations worthwhile.

Microsoft’s proposal to AMD is still in rather murky waters. But let’s just assume that whilst Microsoft has $95.3 billion in cash, and AMD’s market capitalization currently is around $1.81 billion, Microsoft could make buying AMD relatively easy. In reality, the current value of AMD is three times lower than the company paid for ATI Technologies in 2006. Now that’s saying something.

According to analysts Microsoft dishes out around $100 for each Xbox One SoC (system-on-chip) to AMD. Thus far an approximate 12.6 million Xbox One have been sold, so technically Microsoft has already paid AMD around $1.26 billion for these chips. If Microsoft were to acquire AMD once and for all that would pretty much entail the software giant saving around $1 billion per year. Add to that if Microsoft can come up with adequate chips for smartphones and tablets, then they’ll be looking at even higher savings.

It should be noted that AMD is not a staple necessity for Microsoft. All Microsoft needs is a SoC to power devices (consoles, smartphones and tablets). High end CPUs and graphics cards are not a requirement. But, since it’s very unlikely that AMD would sell just a part of its technologies to Microsoft as its APUs are based on technologies developed for server microprocessors and high-end graphics cards.

Just think, Microsoft buys AMD. Immediately Sony is in hot water. They can either pay Microsoft for every PlayStation sold, or attempt to Frankenstein an entirely new platform using technologies from Intel, Nvidia, ARM or Imagination Technologies.

Microsoft takes its console business very seriously and as such they want to ensure that its technology provider can actually still provide the required technology and that it’s not bought over by a competitor. For example, imagine if you can, that Samsung buys AMD and incorporates the AMD APUs into its TVs. That makes Sansung an instant player in the video console market (pun intended).

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