Источник изображения: Sam Island, Barron

AMD’s deal with Xilinx will slow down the company’s revenue growth

Last month, AMD announced its intentions to take over Xilinx through an exchange of shares, the deal in value terms will be $ 35 billion. AMD shares began to fall in price after the corresponding announcement. Analysts believe that such a business expansion increases the degree of risk for AMD, which until then developed in an understandable way for itself.

Image source: Sam Island, Barron's

Image source: Sam Island, Barron’s

Experts expect AMD to increase its revenue by 40% this year, and its net profit will more than double to $ 1.5 billion. Next year, the company’s revenue may grow by another 50%. It was these expectations that fueled demand for the company’s shares throughout the year; over the past twelve months, they have risen in price by 126%. The Xilinx deal adds uncertainty to AMD’s future, which is why the stock market reacts to this news with a decline in quotes. There is a danger that AMD will divert too many resources to integrate Xilinx’s business, as a result of which traditional markets for it will receive less attention.

Xilinx may face a 3% cut in revenue this year due to the economic impact of the pandemic and US sanctions against Huawei. On the other hand, for Xilinx, the upcoming deal with AMD opens up good prospects, according to J.P. Morgan. According to them, AMD will increase the total budget for research and development after the merger with Xilinx, the latter will have access to new market segments, and access to advanced lithographic technology will also be easier. A well-developed software ecosystem will also allow AMD and Xilinx to gain synergy from the mutual integration of their developments. The outlook for the Xilinx share price has been raised from $ 96 to $ 138, the deal with AMD provides for an exchange rate of $ 143 per Xilinx share, and now quotes are hovering around $ 119.

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