AMD sells handset, multimedia assets to Qualcomm for $65M
The business adds to Qualcomm's multimedia technologies and gives it direct control over several graphics cores it has been licensing from AMD for years.
By Suzanne Deffree, Managing Editor, News -- EDN, January 20, 2009
Qualcomm Inc has agreed to pay approximately $65 million for certain graphics and multimedia technology assets, intellectual property, and resources that were formerly the basis of AMD Inc’s struggling handheld business.
The deal, closed Monday, lightens AMD's load. The company in mid 2008 announced it would shed some consumer businesses, including its handset unit, as it looked to focus on core technologies and re-establish profitability. Since then, AMD has also sold its DTV business to Broadcom for $141.5 and spun out its manufacturing assets into a separate company.
The deal also helps AMD trim its headcount, a continuing cost-reduction effort at the MPU maker. Under the terms of the agreement, Qualcomm extended offers of employment to various design and development teams from AMD’s handheld business. The teams are developing technologies to enhance mobile devices in areas including 2D and 3D graphics, audio/video, display, and architecture.
“With the sale of these handheld technology assets and resources to Qualcomm, we are better able to focus on our core business and leverage our unique position as a leader in both x86 computing and high-end graphics,” said Robert J. Rivet, AMD's CFO, said in a statement this morning. “We believe the talented AMD handheld employees will be a great asset to Qualcomm.”
The acquisition further enhances Qualcomm’s multimedia capabilities and provides the San Diego-based company with several technologies it has licensed from AMD for years.
“This acquisition of assets from AMD’s handheld business brings us strong multimedia technologies, including graphics cores that we have been licensing for several years,” said Steve Mollenkopf, executive VP of Qualcomm and president of Qualcomm CDMA Technologies, in the statement. “Bringing this technology in-house creates even greater synergy as we seamlessly integrate the best-in-class multimedia performance AMD offers into our system-on-chip products.”
The announcement has not been well accepted by Wall Street, which dropped AMD's stock nearly 7% as of 11:48am eastern today to $2.13. Qualcomm's stock, QCOM, was also down at that time by nearly 2.3%, however, to a much higher trading price of $35.20.
"We believe the transaction has been widely discussed given this close collaboration over several years," Tim Luke, a semiconductor market analyst at Barclays Capital, said in a report today. "We believe the deal … underlines the increasing strategic importance of multimedia capabilities."
Luke estimated this segment of AMD's business accounted for approximately $44 million in Q3 2008 revenue and approximately $37 million in Q2 2008 revenue.
Qualcomm expects the acquisition to be approximately $0.02 dilutive to pro forma earnings per share in fiscal 2009 and accretive to earnings by the second half of calendar year 2010.
Qualcomm is slated to report earnings on January 28. AMD is lasted to report earnings on Thursday.
