Qualcomm Buys AMD Assets in $65M Power Play
Updated from 3:24 p.m. EST
Qualcomm
(QCOM) - Get Qualcomm Inc Report
has bought a chunk of
AMD
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's hand-held assets for $65 million, in an attempt to deliver complex graphics and multimedia services on mobile devices.
The purchase comes at a time when technology firms are eyeing opportunities in next-generation
telephone networks
. Qualcomm, for example, is seen as one of the
more promising
stocks in an
tech sector, thanks partly to its support for 3G cell-phone networks, and the eventual advent of 4G.
4G networks, which will offer high-speed multimedia services via cell phones and mobile devices, are expected to make their debut in 2012, although Qualcomm is clearly laying the foundations for the technology through its purchase of AMD assets. Like processor giant
Intel
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, the San Diego, Calif.-based company has also thrown its weight behind System-on-Chip technology, which combines different computer components onto a single piece of
.
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Qualcomm is now getting its hands on a number of graphics technologies that it previously licensed from AMD, according to Steve Mollenkopf, executive vice president of Qualcomm. "Bringing this technology in-house creates even greater synergy as we seamlessly integrate the best-in-class multimedia performance AMD offers into our system-on-chip products," he said, in a statement.
The chip manufacturer expects the deal to be approximately 2% dilutive to pro forma earnings per share in its fiscal 2009 and accretive to earnings by the second half of calendar year 2010.
Despite its attempt to boost its multimedia story, Qualcomm's shares retreated with the broader tech market Tuesday. The chip specialist's shares slipped $1.88, or 5.2%, to close at $34.14, as the Nasdaq fell 5.8%.
AMD's shares dipped 29 cents, or 12.7%, to $2.
Under the terms of the deal, Qualcomm has offered employment to a number of design and development teams within AMD's handheld business. This encompasses the likes of 2D and 3D graphics and audio/video technologies.
Qualcomm, which competes with
Broadcom
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,
Nokia
and
Texas Instruments
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, is seen as one of the most attractive chip stocks and is even planning to take on
Intel
in the netbook space. With $13 billion in cash, Qualcomm also owns the lion's share of the Code Division Multiple Access (CDMA) cellular phone chip market.
AMD, which like
recently announced
massive job cuts
, has been
with
from consumers and enterprises, is now looking to re-focus its efforts on more traditional computer kits such as PCs and servers.
"With the sale of these handheld technology assets and resources to Qualcomm, we are better able to focus on our core business and leverage our unique position as a leader in both x86 computing and high-end graphics," explained Robert J. Rivet, AMD's CFO, in a statement Tuesday.
