AMD close to $5.5 billion deal for ATI

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CNN Money:

http://www.tinyurl.com/outhh

AMD seen close to $5.5 billion chip deal

Source says Advanced Micro Devices could announce deal with #2 Canadian
chipmaker as early as Monday.

July 21 2006: 6:35 PM EDT

PHILADELPHIA (Reuters) -- -- Advanced Micro Devices, the No. 2 supplier
of computer processors, is close to a deal to buy graphics chip maker
ATI for $5.5 billion, a source familiar with the situation said on
Friday.

Any such deal would shake up the processor industry, which is
witnessing a battle over market share between AMD and larger rival
Intel (Charts).

ATI (Charts) is one of two major graphics chips makers, along with
rival Nvidia (Charts), and is a big supplier of chipsets - the cluster
of secondary chips and interfaces that surround a computer's processor
- to both AMD and Intel.

Unless talks break down, a deal could be announced as early as Monday,
the source said.

ATI declined to comment, and an AMD spokesman could not be immediately
reached for comment.

Shares of ATI rallied on Friday on renewed speculation that a deal was
close at hand.

After gaining 83 cents, or 5.3 percent, to close at $16.56 on the
Nasdaq market in regular trade, the shares jumped another 7 percent to
$17.68 in after-hours trading on Inet. On the Toronto Stock Exchange,
the stock finished 99 Canadian cents higher at C$18.77.

Rumors that AMD could purchase the Canadian graphics chip maker
surfaced in late May when an analyst suggested the move could make AMD
more competitive with Intel. The speculation sent ATI shares surging
about 10 percent.

Some analysts have questioned the rationale for an AMD-ATI merger, and
others were surprised that the speculation received no attention from
analysts during AMD's earnings conference call on Thursday.

AMD shares closed at $18.26, down $3.39, or 15.7 percent, on the New
York Stock Exchange as investors worried that the company would not be
able to continue grabbing market share from Intel.


_______


more articles on the subject:

http://www.tinyurl.com/hjswl
http://www.tinyurl.com/kdkvy
http://www.tinyurl.com/eth5k
http://www.gamespot.com/news/6154489.html
http://www.tinyurl.com/l2par
http://www.tinyurl.com/hwhvk
 
CNN Money:

http://www.tinyurl.com/outhh

AMD seen close to $5.5 billion chip deal
Click to expand...
<snip>

As one analyst put it, "Breathtakingly stupid". I have *NO IDEA* why
EITHER company would be considering this, it's a definite lose-lose
situation for both of them. The one company that REALLY stands to
benefit from this deal is nVidia.

By joining up with AMD, ATI is likely to lose all their deals with
Intel for chipsets. That includes not only motherboard chipsets but
also their deal to make Crossfire work on Intel boards. This would
probably cut ATI's revenue by about 20% in the next year or so. It
might also seriously hamper ATI's ability to make their video chipsets
work well with Intel's motherboard chipsets making their long-term
prospects seem even more bleak.

For AMD it would probably seriously hamper their relationship with
nVidia, one of their top partners. It is a HUGE investment in a VERY
tricky market. Given the above it's likely to buy AMD a company with
rising costs and sinking revenues. It will also burn up pretty much
all their cash flow, which hasn't exactly been their strong point.

For all that, AMD will get reduced focus, duplication of workforce,
complicated licensing deals that will cost many millions in lawyers
fees to sort out and two company cultures that might not mix very well
(just ask HP and Compaq about mixing company cultures.. this is a
major reason why that merger was a miserable failure).

The biggest potential benefit for AMD is that it gives them a
reasonably good motherboard chipset development team. However this
bonus is watered down somewhat by the fact that the deal might piss
off nVidia who currently make some of the best chipsets for AMD
processors. The benefit for ATI is that it will give them in-house
fab capabilities for their video and motherboard chipsets (if AMD
decides to use their upcoming capacity for this), which might give
them a competitive advantage over nVidia for video chipsets. Again
though this might be offset by being considered a second-class video
chip manufacturer by Intel, giving nVidia a competitive advantage
there.

As mentioned above, the only company that really stands to benefit
from this deal is nVidia. AMD will want to keep nVidia happy and
making motherboard and video chipsets for their processors, at least
for the short term. Intel will want to make nVidia doubly-happy and
probably cut-out Crossfire and start supporting SLI instead.

As for Intel, they can largely control their own destiny. Their main
advantage in this deal is that it will reduce AMD's focus on their
core business, reducing their ability to make competitive processors.


If this merger DOES go through, look to see Hector Ruiz (AMD's CEO)
being unceremoniously fired in about 3 years time when it's clear that
the merger was an utter failure.
 
Tony said:
If this merger DOES go through, look to see Hector Ruiz (AMD's CEO)
being unceremoniously fired in about 3 years time when it's clear that
the merger was an utter failure.
Click to expand...

Yeah, this has "disaster" written all over it, IMO. I've always
thought that an AMD/Nvidia merger made some sense, but I don't see the
same synergy potential with ATI.

Maybe there's something there that we don't know... I sure hope so,
because we need AMD and we need ATI.
 
chrisv said:
Tony Hill wrote:




Yeah, this has "disaster" written all over it, IMO. I've always
thought that an AMD/Nvidia merger made some sense, but I don't see the
same synergy potential with ATI.

Maybe there's something there that we don't know... I sure hope so,
because we need AMD and we need ATI.
Click to expand...
hopefully either the stockholders will reject this (not likely, a 25%
kick?) or the SEC will disallow it, since it gives them a vertical
market position (like MS, which only MS has the money to buy the judges
to allow).

Frankly, while I have always supported AMD in their fight to make intel
back off, this is a very bad bit of news.

But since PC gaming is dying anyway, why worry about it?
 
[email protected] said:
hopefully either the stockholders will reject this (not likely, a 25%
kick?) or the SEC will disallow it, since it gives them a vertical
market position (like MS, which only MS has the money to buy the judges
to allow).
Click to expand...

Neither AMD nor ATI has a monopoly position so the SEC won't even
blink.
Frankly, while I have always supported AMD in their fight to make intel
back off, this is a very bad bit of news.
Click to expand...

My opinion too, but Hector may know something I don't.
But since PC gaming is dying anyway, why worry about it?
Click to expand...

I don't agree at all. This would assume a zero-sum life.
 
Neither AMD nor ATI has a monopoly position so the SEC won't even
blink.


My opinion too, but Hector may know something I don't.
Click to expand...

Don't forget where umm, Hector came from... the big company that err,
"couldn't".
 
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