AMD acquires ATI

Advanced Micro Devices Monday said it has more ammunition to take on its chief rival Intel through its proposed purchase of Canadian graphics specialist ATI Technologies Inc.

The deal, valued at US$5.4 billion, is expected to close by the end of the year. By buying ATI, AMD aims to carve out a bigger piece of the consumer and mobility markets, said the chipmaker’s chairman and CEO Hector Ruiz.

“Our growth strategy is to capitalize on platform technologies in commercial and mobile computing and accelerate the adoption of our technologies in high-growth consumer electronic markets. This will start in 2007,” said Ruiz during a Monday morning teleconference for media and analysts.

By 2008, AMD will deliver technologies that will combine the strengths of the two companies on a single chip, he added.

“We will reinvent what it means to provide processing altogether starting in 2008,” said ATI president and CEO Dave Orton.

The promise of integrated high-end graphic capabilities is the “fundamental reason” for the transaction, said Rick Bergman, senior vice-president and general manager of ATI’s PC group, in a separate interview with “Intel’s had their own graphics and video technologies for a number of years. (ATI) gives AMD a leg up on Intel.”

The combination of CPU and advanced graphics on a single chipset is the where the market is headed, said Voodoo PC chief technology officer and president Rahul Sood.

“It’s absolutely the future, especially for mobility applications. You’ll be able to have multi-core processors with graphics on one part of the core, physics on another and maybe two CPU cores, and all with a shared cache. It’s all possible.”

The Calgary-based gaming PC maker uses both Intel and AMD chips in its products, but Sood said that Monday’s news certainly gives AMD a boost.

“I’m a fan of Conroe and Woodcrest and everything that Intel is doing right now,” said Sood, referring to some of Intel’s newer chipsets, “but I’m also a fan of good technology. The long-term outlook for AMD, especially after this deal, is unbelievable.”

Intel already has a decade of experience with combined chipsets, said Illuminata analyst Gordon Haff, but mostly in the low-end of the graphics market. ATI gives AMD “a much, much broader range of the graphics market.”

The acquisition has been approved by the board members of both companies but is still waiting shareholder approval. Some of the organizational elements have yet to be determined, said Bergman, but ATI will be maintained as a division of AMD, and much of its branding retained, including the Radeon name and ATI itself.

ATI will continue to operate its main facility in Markham, Ont., and no layoffs are expected. Following the acquisition Orton will serve as the executive vice-president of the ATI business division and report directly to Ruiz. All ATI employees will continue to report to Orton.

Despite the fact that AMD and ATI are gearing up for combined products, Intel and NVidia will not be frozen out. “We certainly foresee that there will be combinations of Intel processors with ATI graphics and NVidia chipsets with AMD processors as well. It’s about open competition and open standards,” said Bergman.

Openness makes sense in the short term, said Haff, but he expects to see AMD cosy up to its new acquisition and eventually shy away from combinations with NVidia where possible. “I don’t really expect AMD would have made this deal if its intent was an arm’s length relationship with ATI,” he said.

Bergman acknowledged that this could be the case. ATI, for example, has good relationships with laptop makers Lenovo and Toshiba. AMD may not displace Intel mobile chipsets in their products, but its deal with ATI “will really level the playing field. Certainly those (OEMs) look to CPU vendors to provide a complete solution a la (Intel) Centrino. Now AMD has that capability,” said Bergman.

ATI’s founder and former chairman K.Y. Ho was not available for interviews. Ho was once under suspicion of insider trading but was cleared of all allegations in 2005. Bergman said those allegations would have no bearing on the AMD-ATI deal.

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