AMD has completed its acquisition of SeaMicro as part of its strategy to regain lost server market share from Intel and better position itself against future competition from ARM - based players such as Nvidia .
AMD
amd complete acquisition seamicro strategy regain lose server market share intel well position future competition arm base player nvidia
<m> AMD </m> has completed its acquisition of SeaMicro as part of its strategy to regain lost server market share from Intel and better position itself against future competition from ARM - based players such as Nvidia .
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3 / 27 / 2012 @ 10 : 05AM
AMD Completes SeaMicro Acquisition Headed to $9
<m> AMD </m> has completed its acquisition of SeaMicro as part of its strategy to regain lost server market share from Intel and better position itself against future competition from ARM - based players such as Nvidia .
We previously wrote on how AMD can benefit from this acquisition ( see AMD Picks up SeaMicro to Strengthen Server Market Offering ) .
Here we take a brief look at the price that AMD paid for SeaMicro , and what this implies about its growth expectations .
AMD shelled out $334 million for the acquisition of SeaMicro .
Since SeaMicro ’ s revenues or 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 EBITDA margin of close to 25% and apply similar corporate expenses ( as % of revenues ) including taxes , capital expenditures and others that we apply for AMD .
If we assume SeaMicro ’ s revenues for 2012 will be somewhere around $50 million , it implies that AMD expects SeaMicro ’ s revenues to grow at an average annual rate of 43% to 44% over the course of our forecast period , which extends till 2018 .
These revenues include both SeaMicro ’ s revenues as well as incremental benefit in server - related revenues from the acquisition .
On the other hand , if we assume SeaMicro ’ s revenues for 2012 to be of the order of $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 . 21 , implying a premium of little under 15% to the market price .