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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