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Business deals

AMD to acquire rival chipmaker Xilinx for $35bn

Deal to escalate battle for data center market, long dominated by Intel

A Xilinx sign is seen during the China International Import Expo (CIIE), at the National Exhibition and Convention Center in Shanghai.   © Reuters

PALO ALTO, U.S. -- Advanced Micro Devices said Tuesday that it has agreed to acquire Xilinx in an all-stock deal valued at $35 billion, the latest big tie-up in the rapidly consolidating semiconductor industry.

The deal, expected to close by the end of next year, marks AMD's largest acquisition to date. It would create a combined company with 13,000 engineers and more than $2.7 billion in annual research and development spending, AMD said.

The combination of the two California-based companies is expected to intensify competition in the lucrative market for chips used in data centers, an area long dominated by Intel, the biggest U.S. semiconductor company by revenue.

The AMD-Xilinx tie-up comes after another American chip giant, NVIDIA, agreed to acquire ARM Holdings for $40 billion last month. Both acquisitions take place against the backdrop of growing demand for server chips used in data centers as the pandemic created a massive shift to remote work and at-home entertainment across the world.

AMD also released its third-quarter financial results Tuesday. The company reported a 56% jump in sales to $2.8 billion, despite the disruptions caused by the coronavirus and U.S.-China trade tensions.

Xilinx, meanwhile, has taken a hit from Washington's ban on Huawei as the Chinese tech giant had accounted for 6% to 8% of the company's total revenue. The company excluded Huawei from its earnings forecast since it was put on the trade blacklist in May 2019, and reported an 8% year-over-year quarterly revenue decline last week.

On Tuesday, AMD executives said they hoped to leverage Xilinx's industry network and expertise to further expand the combined company's data center business in more locations and sectors.

"Together, we will be a stronger strategic force powering the next-generation data center," said AMD CEO Lisa Su in an earnings call.

"In telecom, for instance, where Xilinx has solutions capabilities and relationships with industry leaders including Samsung and Ericsson, we will now have an accelerated path to market to better address the largely untapped $5 billion market opportunity for our EPYC processors," Su added.

Victor Peng, Xilinx president and CEO, said, "Joining together with AMD will help accelerate growth in our data center business and enable us to pursue a broader customer base across more markets."

AMD shares were down more than 4% on Tuesday, while Xilinx jumped more than 8%.

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