Why Apple Inc. Will Not Acquire Advanced Micro Devices, Inc.

By Markets Fool.com

Over on Twitter, I came across the following "tweet":

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This sparked quite an interesting discussion between a lot of smart people, some of whom thought that an acquisition ofAMD byApple would be a great idea, others not so much.

I am firmly in the camp that believes Apple would get very little from acquiring AMD. Here is why.

Not much AMD has to offer that Apple does not already have
AMD's main assets are its CPU core development teams, its graphics processor teams, and its system-on-chip integration teams, and I do not think that Apple really needs the full teams from AMD as it has organic efforts here.

If that sounds familiar, that is because it is a very similar argument for why I believe Samsungwill not acquire AMD.

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As far as CPUs go, Apple is all set. Its low-power CPU cores offer best-in-class performance -- Apple is ahead of Samsung here, actually, as the latter still uses stock ARMcores, and the company seems to be able to poach talentfrom any company that it would like.

As far as graphics processors go, Apple has seemingly been hiring graphics talent for quite some time. If Applereallywanted to bring best-in-class graphics IP in-house quickly (rather than try to build it organically as it seems to be doing now), then the company could just buyImagination Technologiesfor a fraction of what it would pay for AMD once its debt is factored into the equation.

Finally, just as Samsunghas its own system-on-chip integration teams, so does Apple, and they seem to do a solid job. I do not think having the integration teams in-house would be something Apple would be interested in.

Does Apple want to sell PC chips and graphics processors?
If Apple were to buy AMD, it would necessarily inherit all current business units and projects. AMD builds standalone graphics processors for notebooks and desktops, PC chips that it sells to PC vendors, and it is even working on a number of projects in embedded, servers, and semi-custom.

I do not believe Apple wants to be in the business of selling chips into all of these markets. While some might argue that Apple could use AMD processors to power its Macs, keep in mind that its PC chips are currently not competitive. Apple would likely need to invest significantly in the acquired AMD asset to bulk up the performance of future AMD products just to make them usable in the Macs.

And, even then, there is still no guarantee that these chips would wind up competitive enough to boot Intel.

An Apple buyout of AMD seems like a pipe-dream
The idea that Apple will buy AMD seems highly implausible, just like the rumored buyout of AMD by Samsung. I disagree with the author of the tweet mentioned above and think that an Apple/AMD hookup makes evenlesssense than a Samsung/AMD hookup.

Samsung, at the very least, would bemorelikely to try to make AMD's PC processor business viable since it has expressed interest in selling its Exynos processors to other phone/tablet vendors.

Apple, on the other hand, designs chips for its own use -- it is not a merchant chip company nor does it have any ambitions to be one. Picking up a company like AMD just to service its internal chip needs, particularly when Apple already has strong in-house capabilities that it can continue to build organically, just does not make sense.

The article Why Apple Inc. Will Not Acquire Advanced Micro Devices, Inc. originally appeared on Fool.com.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple, Intel, and Twitter. The Motley Fool owns shares of Apple and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.