Acquisition rumours need to be taken with an even bigger pinch of salt than other rumours due to the vested interests involved. Short-term traders stand to benefit from any sudden share price fluctuations, especially if they anticipate them, and the use of trial balloons by would-be acquirers is common.
If the latter was the source of the rumour last week that Dell was thinking of buying chip underdog AMD, then the answer from the market appears to be ‘go for it'. Both AMD's and Dell's share prices jumped on the speculation, although Dell also announced strong earnings.
It's not obvious to us why Dell would want to make such a purchase, however. leaving aside the fact that Dell has been almost exclusively Intel from day one, it's hard to see how Dell would manage being the owner of the only alternative x86 CPU maker to Intel and only alternative to NVIDIA in discrete graphics.
Competition authorities, presumably, wouldn't allow Dell to stop selling AMD chips to its OEM competitors if it acquired the company, so it's hard to see what competitive advantage Dell would get from such a deal. Furthermore, Intel is still a much stronger brand than AMD in Dell's core areas of business, so any advantage it got from owning its own chips would be minimal.
Elsewhere the two biggest losers of the past two weeks (we were preoccupied with MWC last week) were Cisco and Nokia. The reasons for the latter are well documented, and Stephen Elop clearly still has a lot of convincing to do, but Cisco is entitled to feel a bit more hardly done by. The earnings it announced 11 days ago were pretty decent, but investors have become increasingly concerned about the intensity of the competitive environment Cisco finds itself in.
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