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AMD Explores Strategic Options – Report

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Chip maker AMD is reportedly considering its strategic options including a possible patent sell-off

Troubled chip maker AMD has reportedly hired an investment bank to help it consider its strategic options going forward, including a possible sale of the company.

The move is part of the strategic shakeup of the company by CEO Rory Read.

Strategic options

According to Reuters, AMD has hired JPMorgan Chase & Co to explore its options. This could include a possible sale of the company itself, or a sale of some of its assets.

AMD sources reportedly said that an outright sale of the company was not the main reason for bringing in JP Morgan, and another possible option could include a sale of its patent portfolio.

Yet AMD itself said that it was “not actively pursuing a sale of the company or significant assets at this time.”

“AMD’s board and management believe that the strategy the company is currently pursuing to drive long-term growth by leveraging AMD’s highly-differentiated technology assets is the right approach to enhance shareholder value,” said spokesman Drew Prairie.

However, Prairie declined to confirm the engagement, saying AMD does not comment on its relationship with investment banks. A JPMorgan spokeswoman also declined to comment.

Market Struggles

It is no secret that AMD is finding life somewhat difficult at the moment.

The company continues to operate in the shadow of its much larger rival, Intel, which despite its market-leading position is itself finding things tough at the moment, thanks to a slumping PC market, coupled with the consumer move towards the smartphone and tablet form factors.

AMD is also finding itself under pressure from these trends, and is faced with other companies offering low-cost and power-efficient chips based on designs from British firm ARM Holdings. In January 2011, AMD’s board of directors forced the resignation of then CEO Dirk Meyer, worried at the lack of growth and stability in the company.

Intel has managed to use its deep pockets to respond to the mobile trend, with initiatives such as the Ultrabook concept to compete against tablets, as well its own range of power-efficient chips for the mobile sector. AMD cannot rely on such large financial muscle.

To this end, in October, AMD confirmed long-standing rumours when it said it would cut another 15 percent of its workforce, or 1,770 positions. That latest round of job cuts came almost a year after AMD executives slashed 10 percent of the workforce in 2011. AMD currently has more than 11,000 employees worldwide.

What Next?

Reuters reports that some investors believe that part or all of AMD could be bought by a technology company, with possible suitors including the likes of Microsoft, Google, Samsung, or even Intel or Facebook.

The thinking behind any potential sell-off is that the buyer would gain tight control over both the hardware and software of their respective offerings, a strategy used by Apple to great affect.

One source said AMD was a “legacy company” and it might prove difficult to sell because of its dependence on the PC industry and lack of strong mobile offerings.

Another source said AMD’s game console chip and embedded chips businesses were growing and attractive.

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