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AMD is reportedly mulling a spin-out or breaking up the company, but the value of its businesses is uncertain

AMD has hired a consulting firm to help the beleaguered chip company ponder a split of its business or a spin-off, according to a Reuters story that appeared Friday night. After years of losses, decades of competing as the No. 2 to Intel and countless mistakes on execution or failure to see a market, the story paints the decision as one of many that CEO Lisa Su might make to help turn AMD around.

AMD spokeswoman Sarah Youngbauer says, “we have not hired an outside agency to explore spinning-off/splitting the company,” and added that AMD remains committed to the strategy the company laid out in its financial analyst day held in May.

Some kind of break up may be the right move to make, especially as the stock market presses chip firms to perform despite their status as a mature industry. In the first half of this year, we’ve seen several large chip mergers, including Freescale getting acquired by NXP in an $11.8 billion deal, Intel’s $16 billion plan to buy Altera, and Avago’s whopping $37 billion purchase of Broadcom.

In the most recent earnings call, Su was asked how the company viewed M&A or other strategic activities, and she told the analysts that while she was always looking for ways to optimize the business, the company had a lot of IP that worked well together and that would be her focus going forward.

Unfortunately for Su, it’s not clear how much AMD has to offer. The company has struggled since failing to see the development of the mobile computing market, which leaves it with a graphics chip business and the traditional x86 server business where it competes with Intel. It has licensed the technology to make x86 chips from Intel, and any deal might jeopardize that agreement. When AMD spun off its foundry business in 2009, Intel threatened to revoke AMD’s license. They settled, but analysts seem to view the x86 license as a rationale for a company to purchase AMD.

AMD also has a custom semiconductor business, which provides the silicon inside game consoles such as the Playstation 4, that it hoped would bring in some serious revenue. However, that revenue is hard to predict because it depends on new console launches and the holidays. AMD also is expanding its semi-customer efforts to the server business, where it hopes to make custom-processors for large-scale data center customers, much as Intel does.

On the graphics side, AMD just announced graphics chips at the E3 video-game expo that have some impressive technology inside. Analysts have praised the new processors and think they could give AMD a leg up over Nvidia in the gaming and graphics market.

And if virtual reality takes off, the graphics chips that AMD offers could make their way into more products and provide additional revenue.However, it appears that the custom chip business provides the intellectual property that Su seems to consider the most valuable, according to an analyst brief from FBR & Co.

With a current market cap of $2 billion, cash of $906 million as of last quarter, and debt of $2.27 billion, AMD makes a good target for some sort of drastic effort. It has seen its market cap decline by about 40% in the past year, and is one of two players in its two largest markets. It competes against Intel in the x86 server market that sells into the worlds’ largest data centers, and it competes against Nvidia in the GPU business. When it comes to R&D the company has built some incredibly innovative products in its history, but has been felled several times by an inability to execute.

So there is clearly interest in what AMD might have to offer a semiconductor market hungry for consolidation, but the value of those assets is clouded by uncertainty.

This story was updated 6/20 at 7 pm to include AMD’s response.

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