Rumor has it that in an effort to start its chip design operations, Microsoft may acquire Advanced Micro Devices, according to a source close to KitGuru. It appears that Microsoft initiated the talks several months ago, claimed the source. Talk results remain unclear.

Apparently, this move, if true, will hit a vast swath of industry major players across the globe as AMD is itself the only hardware supplier to Microsoft’s own Xbox and Sony’s PlayStation. Apple also uses AMD tech when it comes to the professional graphics cards included in the Mac Pro and some MacBook models.

The source also claims that Microsoft has developed some chips for its own hardware and failed to produce competitive solutions for the company and has relied numerous times on companies like AMD and Nvidia to make viable chips and hardware.

As this is unofficial, it’s only normal to state that current negotiations remain unclear, especially about Microsoft’s exact proposal to AMD, but it’s good to keep in mind that Microsoft’s operating funds are $95.3 billion in cash while AMD is capitalized right now at around $1.81 billion, so the possibility of an offer that AMD can’t refuse from Microsoft is still very much possible.

As rumors went around these days for AMD to split its CPU manufacturing department, and probably to sell it, prove an irrefutable fact: AMD’s current value today is three times lower than the company that bought ATI Technologies in 2006.

Microsoft already paid AMD around $1.26 billion for all of its Xbox One chips, as each chip is costing Microsoft $100 with a current 12.6 million units already sold since its launch. We can safely assume that Microsoft is hypothetically easily buying AMD each year it orders chips from the company.

A potential acquisition would save the company important sums of money yearly and would use its infrastructure to produce chips for smartphones and tablets.

Microsoft won't rush things

The one impending factor that actually stops Microsoft from buying AMD is not money but the structure of AMD itself as the company does not produce exactly what Microsoft needs except the accelerated graphics which is the main and only truly profitable department of AMD.

With the recent launch of the Radeon Fury X, such a move will simply destroy AMD financially making it unprofitable even for Microsoft. Time has to pass for this to happen, if ever.

The consequences for such an action would be mildly put, enormous, in an instant Sony and Apple would be confronted with an unacceptable situation of either developing its own hardware or put money in Microsoft’s pocket’s every time a PlayStation or iMac is being sold. Turning to ARM and Imagination Technologies would be possible but entire industry infrastructures and supply-chain standards would have to be changed.

This just shows how fragile the balance in the IT industry is, held there only at the will of the major players like Microsoft and Samsung. A similar move from Samsung or even Sony would start a complete chaos with smaller companies and even larger ones like Apple that depend on companies like AMD to provide excellent products with enough profit to build a solid brand.

This rumor can prove to be fake as Microsoft or AMD have not commented on the article yet. Previous rumors started by Reuters of AMD splitting up have proven wrong before. But even when rumors are wrong, they can seriously affect AMD's image and show some underlying weakness.

We'll keep you posted as the situation unfolds.