This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

AMD Buys SeaMicro, Heads Toward $9

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- AMD (AMD) has completed its acquisition of SeaMicro as part of its strategy to regain lost server market share from Intel (INTC) and better position itself against future competition from ARM-based players such as Nvidia (NVDA). We previously wrote on how AMD can benefit from this acquisition. Here we take a brief look at the price that AMD paid for SeaMicro, and what this implies about its growth expectations.

See our complete analysis for AMD .

AMD shelled out $334 million for the acquisition of SeaMicro. Since SeaMicro's revenues and other financials were not disclosed, it becomes difficult to gauge whether the price paid was cheap or steep. However, based on certain assumptions, it is possible to understand the range of AMD's growth expectations from SeaMicro.

For the purpose of calculations, we assume that SeaMicro operates at an EBITDA margin of close to 25% and apply similar corporate expenses (as a percent of revenues) including taxes, capital expenditures and others that we apply for AMD. If we assume SeaMicro's revenue for 2012 will be somewhere around $50 million, it implies that AMD expects SeaMicro's revenue to grow at an average annual rate of 43% to 44% over the course of our forecast period, which extends to 2018. These revenues include both SeaMicro's revenue as well as incremental benefit in server-related revenue from the acquisition.

On the other hand, if we assume SeaMicro's revenue for 2012 to be $150 million, it implies that AMD's growth expectation for SeaMicro and related incremental server revenues stands at somewhere around 16% to 17%.

According to AMD's own calculations, it has paid a handsome price for the acquisition.

Our price estimate for AMD stands at $9.12, implying a premium of a little under 15% to the market price.

Click here to find out how a company's products impact its stock price at Trefis.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.70 0.00%
FB $78.81 0.00%
GOOG $540.78 0.00%
TSLA $230.51 0.00%
YHOO $42.04 0.00%

Markets

DOW 18,070.40 +46.34 0.26%
S&P 500 2,114.49 +6.20 0.29%
NASDAQ 5,016.9290 +11.5380 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs