x86 wishlist: The complexities of a phantom Intel takeover

Editor’s opinion: We’re often asked some version of the question: “Will someone buy Intel?” We think this is very unlikely at this stage, but these are unpredictable times. Leaving aside all the basics like money, strategy, and regulatory approval, there are a few more hurdles. The most important of these is Intel’s x86 license.

Apparently, when Intel and AMD settled their decades-old dispute over x86, the cross-licensing agreement included provisions regarding transferability. If either company were to be acquired, the other would have the right to revoke the license, effectively blocking the deal. We must think that when this was signed everyone involved assumed AMD would be acquired, but the verdict seems to be mutual and times change.

Editor’s Note:
guest writer Jonathan Goldberg He is the founder of D2D Advisory, a multi-functional consulting firm. Jonathan has developed growth strategies and alliances for companies in the mobile, networking, gaming and software industries.

Just for fun, let’s think about how this would turn out. Right now, Intel’s potential buyer is likely Broadcom. What happens if they apply to AMD for this license?

AMD will have a few options. Their default position will likely be to reject and block the deal. Broadcom is a fearsome competitor, and even if they don’t compete directly in every area, Intel revived under Broadcom would be a serious threat to AMD.

However, a failed Intel would also be a big problem for AMD, if for no other reason than either of them. hip mounted in case of x86AMD needs to stay healthy. All this means there is room for negotiation.

What does AMD require to grant this approval? They were obviously going to get some money. But it’s clear what Broadcom would be willing to pay before the Intel deal loses its appeal. This probably amounts to several billion dollars. Beyond cash, there are things AMD could want that would be much more strategically valuable.

For starters, they can look to Broadcom for help in their fight against Nvidia. This is a common interest between the two companies, and there are many ways both can benefit from a deeper partnership. Broadcom, for example, could invest more in AMD’s Ultra Ethernet and other networking initiatives. Alternatively, Broadcom could design an entire networking stack optimized for AMD’s Mi300 series AI accelerators. Going further, AMD could request Broadcom to encourage AI ASIC customers to adopt AMD-friendly network interfaces. We think there are many new ways Broadcom can support AMD’s interests in its joint fight against Nvidia.

Alternatively, AMD could ask Broadcom to direct its business to ZT Systems. After acquiring ZT, AMD plans to sell the production part of ZT. Maintaining a healthy backlog of Broadcom orders will certainly make this business more attractive.

Unity against guns: Intel CEO Pat Gelsinger and AMD CEO Lisa Su at Lenovo Tech World 2024, where both companies announced the x86 Ecosystem Advisory Group

AMD also wants to ensure that Broadcom continues to spin off Altera, which competes with AMD’s Xilinx division. They may even force Broadcom to include more Xilinx products in future designs and reference platforms.

The point of these requests is that they have the potential to deliver significant strategic value to AMD while being relatively low cost to Broadcom.

While this thought experiment is just to get started, it highlights one more hurdle for anyone interested in buying Intel. Few potential buyers can offer similar strategic advantages to AMD. For Intel, for example, a private equity buyer would only have cash to offer, and that might not be enough for AMD to join. The deal is unlikely, but if it happens it could shake up many aspects of the industry.