AMD to buy ATI

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Skuzzlebutt
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AMD to buy ATI

Post by Skuzzlebutt » Mon Jul 24, 2006 3:56 pm

Snipped from the Wall Street Journal http://www.wsj.com

Given the way Intel and ATI are so often in bed together and AMD with Nvidia...this makes for some interesting times ahead...if it goes through.



AMD Will Pay $5.4 Billion To Purchase ATI Technologies
By DON CLARK and DENNIS BERMAN
July 23, 2006 4:16 p.m.
SAN FRANCISCO -- Advanced Micro Devices Inc. plans to pay about $5.4 billion to buy ATI Technologies Inc., people familiar with the matter said, in what would be one of the biggest-ever acquisitions of a semiconductor maker.
The companies were in late stages of negotiations Sunday, with a deal likely to be announced as early as Monday morning, these people said. ATI had a market capitalization of about $4.2 billion as of Friday. The consideration from AMD is expected to be mostly in cash, with the remainder comprised of AMD shares, these people said.
The long-rumored deal, if completed, could transform AMD's long-running battle with Intel Corp., the No. 1 supplier of the microprocessors that serve as electronic brains in personal computers. ATI, based in Markham, Ontario, is best known for another category of chips that handle PC graphics, a market where it competes fiercely with Nvidia Corp.
Significantly, ATI also makes another category of accessory products called chip sets, which carry out functions such as fetching data from memory and sometimes come with built-in graphics. Intel has an even bigger business in chip sets, and has used that capability effectively against AMD.
Intel's strategy has been particularly potent in laptop computers, where the company has used the combination of microprocessors and chip sets to offer such benefits as lower power consumption. AMD, with ATI's help, could match and possibly surpass Intel's ability to offer computer makers such integrated "platforms" of technology, said Jon Peddie, a market researcher in Tiburon, Calif.
Rahul Sood, president of the gaming computer company VoodooPC, argued in a blog over the weekend that ATI is a "diamond hidden deep in the rough." The proposed deal would be a brilliant stroke for AMD, he argued, representing "a go-big strategy that will shake the very foundation of our industry."
The transaction is considered controversial, however. That's partly because AMD has generally enjoyed benefits from being a neutral partner for both ATI and Nvidia, particularly in the market for high-performance PCs favored by game enthusiasts.
AMD needs Nvidia's continued support in selling chip sets and graphics chip that exploit AMD's microprocessors, and so would have to be even-handed in sharing information with Nvidia as well as an ATI subsidiary.
Another possible concern is ATI's track record. The company last year ran into delays in launching its latest high-performance graphics chip, allowing Nvidia to boost its market share. In late June, ATI issued a sales forecast that fell short of analysts' expectations, triggering a sharp drop in its stock price.
AMD also has been separately spending heavily on boosting its manufacturing capacity. The company, which had about $2.5 billion in cash and short-term investments at the end of June, would likely have to take on debt to finance the ATI transaction, further stretching its financial resources at a time when its share price has been under pressure because of competition from Intel.
AMD, of Sunnyvale, Calif., on Thursday reported a 53% jump in second-quarter revenue, but acknowledged that sales would have been even higher if pricing pressure from Intel had not been so severe. In response, the company's stock sunk 15.6% Friday to trade at 4 p.m at $18.26, off $3.39, on the New York Stock Exchange.
Several news outlets carried reports of a potential deal between AMD and ATI Friday, including the Inquirer -- a Web trade publication -- the Toronto Globe and Mail and Bloomberg. ATI shares rose 83 cents, or 5.3%, to $16.56 at 4 p.m. on Nasdaq.
Write to Don Clark at don.clark@wsj.com and Dennis Berman at dennis.berman@wsj.com
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Post by Mattly » Mon Jul 24, 2006 4:33 pm

This could give AmD a really advantage in the market place. I bet Nvidia are rubbing their hands as the wait for Intel to call. If you can buy shares in Nvidia, now is the time to buy in my opinion.
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Post by Typhoon » Tue Jul 25, 2006 9:17 pm

Mattly wrote:This could give AmD a really advantage in the market place. I bet Nvidia are rubbing their hands as the wait for Intel to call. If you can buy shares in Nvidia, now is the time to buy in my opinion.
Good way to blow your money Mattly.
With AMD's cashflow and innovative thinking, ATI may soon be the card of choice and when Nvidia sales fall, so will there stock price.

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