The move is part of chip company AMD’s attempt to raise some cash and regain its footing in its core microprocessor business where Intel has been eating AMD’s lunch.
AMD needs the cash since it has been losing money for seven quarters and is in the process of switching to an “asset light” strategy where it will likely lease its factories rather than own them outright. The digital TV chips will broaden Broadcom’s focus on entertainment chips and allow it to enter the market for low-end TV screens. This is one of those things that is akin to tossing out baggage when a plane is approaching mountains and it’s still too heavy.
The deal is expected to close in the fourth quarter of this year and could cut Broadcom’s full-year earnings by four cents to five cents a share. The boards of both companies have approved the deal, which still requires regulatory approval.
Sunnyvale, Calif.-based AMD is selling off the digital TV division which it acquired the business along with its acquisition of a graphics chip business of ATI Technologies. At the time, AMD executives touted how the digital TV chips would allow the company to diversify beyond the PC chip business into consumer electronics. Intel, meanwhile, refocused on microprocessors and is now forcing AMD to do the same.
Irvine, Calif.-based Broadcom will ask 530 AMD employees, mostly engineers, to join the company. This is really only the first step of creating a leaner AMD. The company will have to do more to improve its balance sheet as it comes up new ways to finance its capital-intensive chip factories. AMD has to be ready for whatever a newly competitive Intel will toss its way.