AmTech Outlines Possibilities of NVIDIA/AMD Merger (NVDA, AMD)

Shares of Advanced Micro Devices (NYSE: AMD) are trading up 4% today at $6.78 in early morning trading.  The company is the beneficiary of another research note out of Doug Freedman at American Technology Research, who has outlined potential scenarios for the possibilities of NVIDIA (NASDAQ: NVDA) acquiring AMD. 

For starters, he notes that the positives outweigh the negatives as both would benefit from a business combination.  Freedman notes that other suitors are possible but NVIDIA would likely be the most motivated here.  This even notes that the combined company could be what is needed to move beyond a 20% CPU company.

AmTech does address antitrust concerns over the graphics chipsets in combining NVIDIA and ATI, mainly by noting that Intel (NASDAQ: INTC) has very little friends in regulatory circles (intel recently disclosed a New York AG inquiry).  This also addresses NVIDIA’s fabless model as another hurdle, but it notes that it believes AMD has explored pursuing a fab-lite model.

This even shows some pro forma results for the combined companies.  For 2008, it would expect $11.336 Billion in revenues with gross profit margin of 45%, $1.048 Billion operating income and $2.47 Billion in EBITDA.  For 2009, it also assumes that 45% gross profit margin and would have a combined $12,527 Billion in revenues, $1.482 Billion in operating income, and EBITDA of $2.68 Billion.

AmTech has maintained a neutral rating on NVIDIA and maintained its Buy rating on AMD.  The company still needs to get Hector Ruiz out of the way first, although that is becoming redundant.

Jon C. Ogg
February 20, 2008