ATI-AMD deal analyzed

Analysts and press alike have been covering the AMD-ATI deal rather
extensively, and some have shared interesting insights into the
situation. Aside from the obvious advantages of “platformization” and
CPU/GPU hybridization cited by AMD and ATI, Jon Peddie
Research believes the acquisition could help AMD’s relationships with PC
vendors. “The best way to reduce the cost for PC vendors is to deal with
fewer suppliers,” the firm says, noting the “aggressive cost procurement
reduction programs” undertaken by companies like Dell and HP. Being able
to sell processors, chipsets, and graphics could also help pump up AMD’s
shrinking gross margin, which fell 1.7% to 56.8% in the second quarter,
according to the New
York Times
.

Despite these prospects, the deal could also present some downsides. The
New York Times thinks the slowing of overall PC sales could be a
challenge for a merged AMD and ATI, and the Wall
Street Journal
says ATI’s track record is also a concern. The red
team has fallen behind NVIDIA in the high-end graphics segment, and its
stock price also dropped in June after a sales forecast that turned out
below analysts’ expectations. ATI could also face troubles from AMD, as
Jon Peddie suggests: “If AMD tries to integrate the whole thing too
aggressively, they will suffer the same fate as Intel did … You need
to leave ATI alone.”

Some also believe AMD paid too much for ATI. The Wall Street Journal
says AMD’s $5.4 billion bid is “one of the largest amounts paid for a
chip maker,” and a ThinkEquity Partners analyst quoted
by Reuters
claims AMD paid “a lot more than it would have six months
ago,” when its stock price was significantly higher and ATI’s was lower.
Indeed, AMD’s shares were at $42.70 back in March but plummeted to
$18.26 on Friday and are now down to
around $17.50. ATI’s shares, on the other hand, were as low as $14.33 in
March, but hit $16.48 last Friday and $19.58 today.

Comments closed
    • Bombadil
    • 13 years ago

    Some things I am wondering about:

    What is to stop Intel from simply buying out ATI in a hostile takeover and then just shelving the whole company? A hostile takeover of ATI wouldn’t positively help intel, but it would certainly send a message to all the big players no one is talking about (Microsoft.)

    IMHO, biggest player to benefit from AMD+ATI would be MS. Both companies are very strong MS allies.

    Maybe this is why Intel isn’t talking much…

      • SGWB
      • 13 years ago

      Even the US courts wouldn’t let that monopolistic action fly. Intel already dominates the markets in graphics processors, motherboard chipsets, and CPU’s. By doing what you describe, they would be actively killing one competitor and harming AMD, who already is pressing anti-trust cases against Intel. The penalties Intel would reap from that kind of action would be brutal.

    • SGT Lindy
    • 13 years ago
      • Proesterchen
      • 13 years ago

      On that, my running theory is still an oil-field they found during construction of FAB 36, which now -instead of that funky & expensive lith equipment- houses a dozen of pumps AMD borrowed from its Texan pals.

    • Buub
    • 13 years ago

    I think everyone is losing sight here. AMD obviously bought ATI so they could get a Ruby. Hubba hubba… I wonder what happens when they find out she’s fictional.

      • Krogoth
      • 13 years ago

      ROFL, thats what AMD really needs.

      A marketing tool to appeals to lonely geeks…… ahem nevermind.

    • albundy
    • 13 years ago

    what a monopolistic disaster that can happen. Are we still to expect quality products from the merged?

      • Saribro
      • 13 years ago

      Does that imply that you consider most Intel products to be lacking in quality ?

    • SGT Lindy
    • 13 years ago

    Wow can we have another article on this subject? 5 is not enough.

      • Tarx
      • 13 years ago

      The biggest news in years deserves all the articles it wants.

        • SGT Lindy
        • 13 years ago

        Biggest news in years???? Maybe the biggest suprise…or blunder but hardly news.

        I was just supprised on all of the articles at one site. Everywhere else including Rage3d the ATI fanboy site only had one.

          • Flying Fox
          • 13 years ago

          Then what is the biggest tech news in your opinion?

            • SGT Lindy
            • 13 years ago

            Good question. I am not saying its not news…but just go to any other site as see if they have even two stories on it…three tops.

            I would say a story about Vista being delayed will easily affect way more people than AMD buying ATI

            • Corrado
            • 13 years ago

            But what is there ti say about Vista being delayed? You say… Vista got delayed, its now scheduled for the 19th of never, and will have none of the features it was supposed to. Thats it. The ATI-AMD deal has ramifications for the entire industry, cpus, motherboards, gfx chips, and who knows what else.

            • Decelerate
            • 13 years ago

            That’s because they’re not as fast-typers as TR. j/k

            This is huge news. We’ll be talking about it for years to come. There’s nothing wrong with 5 articles (and probably a Friday opinion thingymajig) as long as they provide new information.

    • Decelerate
    • 13 years ago

    I agree with idea that the purchase timing wasn’t great at all. Both stocks at their lows not to mention that Intel’s Conroe stealing the headlines.

      • Wintermane
      • 13 years ago

      Thats an understatement. Amd waited far too long and paid far too much.

      And the market is in a downcycle and it will only get worse and they are now massively in debt and facing intel who has already nown about this and is cutting costs so they can go into a deeper pricewar.

      And again ati’s proits will plumet if as likely is the case..1 they have to divert far more resources to integrated chipset and gpu design work and 2 they lose any cance of gaining access to future intel systems.

        • Furen
        • 13 years ago

        ATI was cheaper a year ago, too. It’s nice to analyze these things with hindsight but these things don’t happen all that fast. Very likely AMD has been negotiating this for a while and it just happened that AMD’s stock has taken a beating and ATI rallied a bit from December’s drop in price.

        • Forge
        • 13 years ago

        2 they lose any cance of gaining access to future intel systems.

        Not true. There’s nothing in this deal that says ATI can’t play with Intel, too. All the licensing stays valid, and cross-chipset-CPU families happened all the time in the Socket7 days.

          • thecoldanddarkone
          • 13 years ago

          Although that may be true, Intel has already pulled the amd/ati chipset out. It is just a matter of time before it fades, probably in a couple months to the end of the year there will not be anymore amd/ati chipsets at that point.

            • Corrado
            • 13 years ago

            Would they not be able to fight this in court? The same thing happened with VIA and Intel tried to shut them out when they bought S3 and S3 had some licensing deal with Intel. According to the courts, VIA was able to inherit all of S3’s cross patent and licensing agreements.

            • thecoldanddarkone
            • 13 years ago

            It wouldn’t matter, I am pretty sure all cross patent licences from intel have to be renewed so regardless, it would be at the most a whole year, (however its doubtful that there is even that much time left in the contract). Not including it depends on how the contract was laid, and whether or not intel or ati can pull all agreements at anytime, I am guessing its probably a standard time based contract, anotherwords its only a matter of time, before it expires. We would have to get the contract, read the contract, and proceed to decipher it before any exact details can be laid out, but since bit-tech has already said that intel has pulled the licence agreement and that rd 600 might come out, probably expires at the end of the year.

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