Chipmaker AMD gives private equity "a cold sweat."

By Dan Primack
November 13, 2012

FORTUNE — Earlier today, Reuters reported that chipmaker Advanced Micro Devices AMD “has hired JPMorgan Chase & Co. JPM to explore options, which could include a potential sale.” AMD stock closed 5% higher on the news, but likely will fall in the aftermarket after an AMD spokesperson told Bloomberg that it is not considering a sale of the entire company (just various pieces, possibly).

While waiting for the financial wires to sort this all out, I reached out to a couple of private equity executives with experience in the semiconductor space. And they both told me that AMD would be a very, very difficult company for private equity to acquire. Or, as one said, AMD puts him in a “cold sweat.”

The concern here isn’t AMD’s ongoing legal battles with Intel Corp. INTC , although that certainly wouldn’t help matters. Or even that consumers are moving away from desktops. Instead, it’s math.

AMD already has more than $2 billion of debt on its balance sheet, which is a large load for a company whose equity market cap is just $1.49 billion. On top of that it has significant earnings volatility (not a positive in PE firms’ eyes) and, most importantly, it has negative EBITDA.

“What are you going to leverage?” asks one of the PE investors. “Maybe I could see a sovereign wealth fund doing the deal on an all-equity basis. But no way this is a leveraged buyout.”

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