AMD bid for ATI validates 'platformization'

Executives from AMD and ATI today revealed some additional details about their plans to merge the two companies in a conference call with analysts and media. The biggest questions on most observers' minds had to do with AMD's reasons for wanting to acquire ATI, and the execs addressed those questions at some length. First and foremost, this acquisition looks to be a resounding validation of Intel's "platformization" strategy of bundling together a number of technologies and selling them as a largely complete solution for a specific type of PC. AMD executives said their x86 processor business is already strong in a couple of areas, namely consumer desktops and servers, but has had trouble getting traction in two others: corporate desktop PCs and notebooks. They said repeatedly that the ATI acquisition would allow them to create complete platforms to address these two markets, with the expectation that the ability to deliver well-integrated platforms would lead to new revenue and market-share growth.

More than once on the call, AMD officials spelled out the financial benefits of market-share growth in x86 processors by equating 1% growth with $300 million in additional revenue at margins of roughly 60%. Given those numbers alone, the acquisition of ATI could pay off handsomely if it leads to substantial gains for AMD in corporate desktops and mobile computers.

The opportunity to snap up ATI's consumer electronics business, which includes display processors for both home entertainment and mobile phone/handheld devices, was also a strategic motivating factor according to AMD.

Beyond these mainly business-oriented considerations, AMD President Dirk Meyer and others spoke about the technological possibilities for integration of GPU functionality into CPUs in the future. AMD has been making noise for a while now about potentially incorporating special-purpose computing functionality into its general-purpose processors. The Torrenza initiative to open up the Opteron platform and socket infrastructure to third parties is one part of that technology direction, and the ATI acquisition is apparently another. We may see CPU-GPU hybrids from the combined company take many forms, from inexpensive single-chip solutions tailored for specific markets to new high-performance CPUs that incorporate a subset of current GPU capabilities in order to deliver substantially more computational throughput for vector processing. Meyer cited the example of floating-point units to illustrate how previously discrete computational logic might become a standard feature of future microprocessors.

Despite the talk of integration and platform building, AMD execs emphasized their desire to retain what they have long called a "customer-centric" strategy of doing business. Meyer underscored AMD's commitment to open interfaces between components and maintaining a broad array of partners. He said he fully expects ATI's GPUs to compete against NVIDIA's in the open market, and that ATI's graphics business would be stronger for it. Meyer also said AMD intends to continue working with third-party chipset makers and will continue to supply them with the support needed to enable chipset development.

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