FBR Capital Remains Sidelined on Advanced Micro Devices (AMD) Following Reports of Intel (INTC) Licensing Talks

FBR Capital reiterated a Market Perform rating and $2.50 price target on Advanced Micro Devices (NASDAQ: AMD) following a Bloomberg report that Intel (NASDAQ: INTC) is in licensing talks with AMD. The goal of the talks would be for Intel to utilize AMD graphics technology in its chip designs. The financial details of the potential deal are unknown. However, If the payment from Intel was just a few hundred million dollars, the implications are de minimis. But a billion dollar payment or more, could be a different story.

Analyst Christopher Rolland commented, "Late Wednesday night, Bloomberg reported that Intel is in licensing talks with rival AMD, to utilize AMD graphics technology in its chip designs. There are no other details regarding the boundaries of the IP deal and the size of the potential cash payment to AMD. For Intel, a potential deal would enable the company to boost the graphics performance in their own chips, or perhaps to use high performance GPUs in areas of data center. While less likely a motivation for Intel, such a deal may also give them IP ammunition just in case NVIDIA decided to renew litigation once their cross-licensing agreement expires in early 2017. For AMD, the implication could be significant as a large cash payment could help relieve them of the debt interest burden from the $2 billion of long-term debt on the balance sheet. Additionally, if AMD were to pay this down and the company no longer had massive amounts of debt interest to service, it may be able to focus on just a few products in the most profitable areas (ex. kill ARM servers?)."

For an analyst ratings summary and ratings history on AMD click here. For more ratings news on AMD click here.

Shares of AMD closed at $2.63 yesterday.

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