AMD to shell out $5.4 billion for ATI

OmegaScourge · Jul 25, 2006

dont know if this has been posted but its new to me

cnet news said:

Advanced Micro Devices plans to acquire graphics chipmaker ATI Technologies for $5.4 billion, a move intended to increase AMD's mobile-computing and consumer electronics capabilities, and help battle archrival Intel.

AMD will pay $4.2 billion in cash and issue 57 million shares of common stock to ATI shareholders. Through the acquisition, announced Monday, AMD is looking to expand its efforts in high-growth markets such as consumer digital media and mobile computing, and to bolster its position with large corporate customers.

"This strategy has been in the making for a number of years and culminated with the ATI acquisition," Hector Ruiz, AMD's chief executive, said during a conference call with analysts. "Visual computing is playing a larger role in what we are doing, going forward."

AMD's Opteron family of processors has taken market share from Intel in some areas, though Intel still dominates the overall market and offers chipsets with integrated graphics capabilities.

ATI will add graphics chips and chipsets to AMD's offerings. AMD is also hoping that ATI's strong presence in mobile computing will enhance its desktop business.

Beginning in 2008, AMD aims to create chip platforms that integrate microprocessors and graphics processors. The company plans to develop these chips for use in media, data, graphics and general-purpose devices.

After the ATI announcement, Standard & Poor's placed AMD on its CreditWatch with "negative" implications. S&P's rating service, which lists AMD with a B+ corporate credit rating, cited concern that ATI could find access to Intel's product plans constrained, should the deal go through.

"We will meet with management to assess the effect of the acquisition on AMD's financial profile, the near-to-intermediate-term changes in the graphics chipset industry dynamics, and the company's longer-term position in the personal-computer and consumer electronics processor industries," according to S&P's statement.

AMD's shares were down 4.8 percent to $17.37 a share in midday trading.

One financial analyst, however, applauded the deal.

"It's an innovative idea and a pretty visionary way for them to take their business," said Eric Gomberg, an analyst at Thomas Weisel Partners.

Following the merger, AMD would have the capability to optimize ATI's chipset with its microprocessor, Gomberg noted. And with an expanded breadth of AMD products, Dell may be interested in signing on with a wider spectrum of purchase orders, he added.

Gomberg noted that AMD has a track record in integrating technologies, showing an aptitude in integrating its microprocessors with memory controllers.

Partnerships and competitors
The companies' current partnerships may become an issue in the future. AMD partners with ATI rival Nvidia for graphics chips, while ATI is an Intel partner.

AMD said it expects to continue its partnership with Nvidia, offering customers a choice of two graphics technologies. ATI, meanwhile, plans to continue with its existing product road map for the next six months, which includes "ramping up" on the Intel side.

Intel, meanwhile, is evaluating the pending merger and its possible effect on its partnership with ATI.

"We won't change anything until we learn a lot more about this transaction," said Chuck Mulloy, an Intel spokesman.

Such a complaint may fail to get regulators' attention, given that Intel will remain a dominant player even after an AMD-ATI merger, Gomberg said.

The pending merger is expected to have little effect on Nvidia's graphics-processing (GP) business strategy, said Derek Perez, an Nvidia spokesman.

"Their merger lends to our strategy nicely," Perez said. "We want to be the GP provider for everything that needs a GPU (graphics-processing unit). After the merger, we'll be the only large, independent GP provider."

AMD chose to acquire ATI over Nvidia for several reasons, said Patrick Moorhead, vice president of advanced marketing at AMD.

"ATI is a leader in notebook graphics and...notebook chipsets, as well as a leader in notebook-discrete graphics," Moorhead said. "We think we compliment one another. They're strong in notebooks, and we're strong in the consumer desktop...culturally, we fit together great. We're both partner-focused and customer-centric."

Although the pending merger will bring AMD and ATI under one roof, there are no plans in the near future to combine the manufacturing of AMD and ATI chips into an integrated foundry, Ruiz said.

He noted that microprocessors are manufactured using more mainstream techniques than those required for graphics chips. Both companies are currently facing challenges meeting their existing manufacturing needs, AMD and ATI executives said.

Talk of a merger between the two companies first emerged in May. Over the weekend, the rumors intensified, until it was almost considered a done deal on Sunday.

Many industry analysts have said it made little financial or strategic sense for AMD to buy ATI outright. But AMD, the No. 2 supplier of processors, said it will use the purchase of Markham, Ontario-based ATI to expand its product mix and its market share as it battles No. 1 Intel.

The deal is expected to close in the fourth quarter and lead to combined annual sales of $7.3 billion. The company expects to have a combined work force of 15,000.

AMD has obtained a $2.5 billion term loan commitment from Morgan Stanley Senior Funding which, together with combined existing cash, cash equivalents and short-term investment balances of about $3 billion, provides full funding for the acquisition, the chipmaker said. The deal is subject to the approval of ATI shareholders, as well as regulators in the United States and Canada.

Reuters contributed to this report.
Click to expand...

http://news.com.com/AMD+to+shell+out+5.4+billion+for+ATI/2100-1006_3-6097472.html

Elvin Pena · Jul 25, 2006

I can see this having massive chipset/cross-platform implications; both good and bad. It'll be interesting to see how this particularly affects the OEMs.

Very interesting...

Shin-Gouki · Jul 25, 2006

This worries me, I love AMD but will not touch ATI, if they go the route of our shit only works together, not with Nvidia I'm going to have to go back to Intel, the lesser of 2 evils.

Wing alpha · Jul 25, 2006

I wanted to work for Ati when I was dreaming of computer enginerring...(a year ago)

but mehness my computer doesnt even have a graphics card -yep 64mg thats all I need- until vista anyway

DevilzFan · Jul 26, 2006

AMD > Intel
ATI > Nvidia

I think I can live with this.

Fairy Princess · Jul 26, 2006

My Computer is ATI and AMD already so...

Elvin Pena · Jul 26, 2006

Shin-Gouki said:

This worries me, I love AMD but will not touch ATI, if they go the route of our shit only works together, not with Nvidia I'm going to have to go back to Intel, the lesser of 2 evils.
Click to expand...

With Intel's upcoming Conroe waiting in the wings it might be an easier decision than you thought bro. Check it out:
http://www.anandtech.com/showdoc.aspx?i=2713&p=1

Draven · Jul 27, 2006

DevilzFan said:

ATI > Nvidia
Click to expand...

Not if you're running high end 3D apps. ATI's drivers are dodgy, to say the least. Therefore this news bothers me greatly.

OmegaScourge · Jul 27, 2006

so far, all the computers i've had, all were ATI cards.

and i'd love to get a Conroe cause my current one is a single core chip and kinda old.

Greyryder · Jul 27, 2006

Wonder if this means that ATI will finally get some decent damn drivers. There's a reason I went back to Nvidia.

OmegaScourge · Jul 27, 2006

Question: So all the Intel fanboys (i aint, i just work there), if they buy ATi cards, does that mean they're giving money to the rival (AMD).

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