Is AMD vulnerable to takeover?

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Factor in too that private equity companies would also likely liquidise some of AMD's key assets - those fabrication plants again come into focus - and instead rely on quicker, outsourced solutions. It'd be a swift way to bring a substantial amount of working capital into the business, although not a method without its downsides.

But the problem here is that AMD's balance sheet is riddled with debt. The ATI takeover is still fresh on the books, accounting for a cool $5.4bn. Plus AMD is also making an operational loss, in a market where there's little chance of a quick turnaround, and even less chance of a quick buck. Those factors are putting off many of the keener suitors in the technology space right now, and private equity businesses are keenly aware of that too. And if AMD move quickly and dispose of some of their own fabrication facilities, that may flush the books enough to allow the firm to hold off a potential takeover anyway.

There is, though, one trump card yet to be realised, and that's the ongoing litigation with Intel. AMD has launched an antitrust suit against its main rival, amidst allegations of Intel forcing manufacturers and distributors to take its chips. Should AMD emerge victorious, then there's genuine potential for a turnaround. The problem? A tangible resolution to the case is years away. And we're back to the ever-ticking clock.

Vulnerable?

Ultimately, the AMD story simply isn't clear. In one sense, it's absolutely vulnerable to takeover, and has never been more so. Conversely, it's rarely been in a less attractive state for buyers, certainly not in the past few years. AMD has major challenges to face, and the depth of the problems it finds itself in right now may be enough to hold off any predators. Assuming, as is likely, it begins to make progress in its key sectors over the next year, and manages to get its new product lines in sufficient quantity to market (while holding onto tie-ups with the likes of Dell), AMD is likely to evade the current shopping spree in the technology sector. Just not for the right reasons, it seems.

Our prediction: don't expect the cheque books to coming out in the immediate future, but AMD's next couple of years are set to be extremely testing.

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