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ATI is the most profitable portion of AMD right now, but new SEC filings show the company isn't totally starry-eyed over the purchase either

AMD's acquisition last year left many analysts applauding and enthusiasts shouting for joy.  But one question continued to nag all but the most oblivious -- did AMD overpay for ATI

ATYT was valued by AMD at $3.2 billion at the time of the October 2006 acquisition.  However, according to AMD's most recent December SEC 8-K filing, the company announced that its goodwill value of ATI Technologies was impaired.

AMD's Drew Prairie explains the filing. "Goodwill is the value of ATI operations minus assets; it's what the company is worth in terms of its customer relations, intellectual property, etc."   Prairie sums it up succinctly, "During our annual evaluation, which we performed last week, the goodwill value of ATI is lower than our estimate from last year."

Nicholas Aberle, Caris & Company semiconductor analyst was not caught off-guard by AMD's announcement. "The only surprise we had was that it took so long for AMD to admit," he claims, adding that a considerable chunk of ATI's value was destroyed in the transaction.

ATI Technologies is certainly worth less than when it was last year during the merger purchase, but AMD won't say how much, yet. 

"Dave Orton must be giggling all the way to the bank," adds DailyTech contributor John Lewis.  Orton certainly isn't banking on his 30,000 AMD shares, as the company stock posted a 52-week low today.  Yet there was much speculation that AMD overpaid for ATI Technologies -- a figure roughly, but consistently, estimated at around 20 percent

On an analyst call today, AMD CEO Hector Ruiz vowed the company would return to profitability next year.  "We have gone through a very difficult time, reacted quickly and decisively and we are on our way to really have, I believe, a phenomenal transition year in 2008," Ruiz said.

Prairie also remains optimistic for the future.  "A large part of our acquisition is not about the products that we have, or will have next year."  He adds, "Looking at it in the last year, or the next year, is a short time slice to rule out the fruits of the merger." 

The first of the products developed solely inside the ATI-AMD merger include the 2009 Fusion platform, a technology that will place elements of ATI graphics technologies on an AMD microprocessor.

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AMD is NOT predicting net profit for 2008
By eRacer on 12/13/2007 7:13:44 PM , Rating: 6
When most people hear the word profitability they assume a "net profit". That is not what AMD is predicting. AMD is only claiming "operational profitability" which wouldn't include AMD's substantial interest payments.

Executives said the company would return to operating profitability in the third quarter of 2008 and be profitable on the operating income line for the full 2008 year.

Also, the last paragraph in the DailyTech summary about Fusion didn't mention that the first Fusion processor will no longer be based on the new Bulldozer core, but older "Stars" tech (K8/K10) instead.

By KristopherKubicki on 12/13/2007 7:30:08 PM , Rating: 2
Got a separate article coming together about Bulldozer.

"Stars" is strictly K10 tech btw, "Cities" was K8.

By eRacer on 12/13/2007 8:00:50 PM , Rating: 2
It appears you are correct. At first it appeared that the Swift version of Fusion was based on the Griffin CPU, but instead seems to be the Griffin northbridge only. Griffin cores are similar to K8 cores while the Griffin northbridge is similar to that of K10.

RE: AMD is NOT predicting net profit for 2008
By Ringold on 12/13/2007 8:48:21 PM , Rating: 1
That's a good catch.

If the stock continues to drop, though, regardless of what Meyer claims or their performance, then.. I've said it before, and one of the Fast Money guys tonight said it again; if the stock continues to go lower, someone will simply buy them out. The dollar is weak, investment has been flooding in (probably why the dollar has bottomed), and if its really discounted then it'd only make sense someone would come and swallow them up. Alternatively, they might just buy in a big stake. Either way.

RE: AMD is NOT predicting net profit for 2008
By crystal clear on 12/14/2007 7:10:28 AM , Rating: 1
Either way they are stuck with a huge debt burden & serious creditability issues.
Either way the market(financials) will not trust anything coming from AMD.
Either way the market(OEMs) will not touch AMD products due serious reliabilty issues.

You as the buyer(buyout company) will buy yourself a lot of problems.

By Spuke on 12/14/2007 11:30:41 AM , Rating: 3
Either way the market(OEMs) will not touch AMD products due serious reliabilty issues.
Are you talking about reliability issues with the quad cores? Why would the channel not purchase ANY AMD product based on the problems with ONE product?

By crystal clear on 12/13/2007 8:29:14 PM , Rating: 2
AMD Predicts Profitability for 2008

Predictions are like crystal gazing -usually dont come true-just makes you feel good & forget about it.

All you hear about AMD is delays-disasters-debts.

Till now I blamed the management for all AMD's problems-now I blame both the management & directors & shareholders for all whats happening to AMD.

Instead of false promises & claims,its time they just SHUT UP & DELIVER.

I really dont understand how the shareholders can sit back & behave as if its business as usual.
They dont seem to care either,because if they did this AMD management should be getting ready to leave.

As for those roadmaps ,its like the weather- unpredictable & ever changing.

Those benchmarks are highly questionable & performance is some joke.

The year 2008 will as bad or even more worse than 2007....

RE: Delays-Debts-Disasters
By Ringold on 12/13/2007 8:57:39 PM , Rating: 2

Looks to me like shareholders care. They've shown their concern by dumping the stock! :) The average joe like you or I that buy .000000000000001% stakes can't really do much, and perhaps the Carl Icahn types don't know enough about the CPU business to come in and shake things up like they can at more traditional businesses. That's all I can imagine, who knows.

Says that 83% of the stocks are held by institutions, so.. perhaps they've let Ruiz know he's on thin ice. I'm a little surprised there's been so little feedback as well; perhaps it's just not been public.

If I had a real pair of coconuts, I'd come in and buy some and then hunker down for a couple years, hoping for a buy-out or that it couldn't get worse.. but I remember watching Lucent stock's unending fall to oblivion, so I guess I'm a girly man...

RE: Delays-Debts-Disasters
By crystal clear on 12/13/2007 9:44:21 PM , Rating: 2
Ringold you strike gold when you use the keyboard to comment.

RE: Delays-Debts-Disasters
By crystal clear on 12/14/2007 4:27:13 AM , Rating: 2
To rework an old joke, Hector Ruiz goes back to a college reunion and boasts, "In 2007, I made AMD a $5 billion corporation." Someone asks, "What was it before that?" and a classmate now with Intel says, "A $10 billion corporation."

RE: Delays-Debts-Disasters
By crystal clear on 12/14/2007 9:49:04 AM , Rating: 1
Can you believe this-

AMD raised Hector Ruiz annual base salary by 7.4 percent to $1,124,000. The amended agreement was dated Dec.7/07.

Exhibit 10.1

January 31, 2002 (as amended through December 7, 2007)

Dr. Hector de J. Ruiz


Re: Employment Agreement

Dear Hector:

On behalf of the Board of Directors of Advanced Micro Devices, Inc. (including any successor thereto, “AMD”), I am pleased to offer you continued employment in the position of Chief Executive Officer of AMD on the terms set forth below.

1. Position.

Why ATI ? Why not SIS or VIA ?
By Boushh on 12/13/2007 9:05:03 PM , Rating: 5
Indeed, why ATI ?

If AMD was looking for adding a company that had good chipsets and graphics technoligy it seems that SIS would just as easy fit the bill, and it would not have costed them an arm and a leg.

Looking at Fusion it doesn't seem to be designed to replace high-end (or even mid-end) GPU solutions. The main goal of the Fusion concept seems to be to cut costs. By putting more functionality on a single chip, costs would be cut in various areas (like the number of chips and board design).

Then if that is the case, why take over ATI ?

Just my 2 cents....

By Ben on 12/13/2007 8:47:14 PM , Rating: 4
This is now one of the mysteries of the universe.

1) How do socks disappear in the dryer?

2) Why does Hector Ruiz still have a job?

3) Where are the WMD's?

By fic2 on 12/13/2007 7:11:15 PM , Rating: 2
In another article I saw AMD was saying they would be shipping 45nm in second half of '08 (read Dec 31), but as far as I can tell looking at what they are producing they barely have 65 nm working.

AMD's problem - manufacturing process
By casket on 12/13/2007 9:19:38 PM , Rating: 2
AMD really isn't doing any worse than they have in the past... Intel is going faster... and AMD isn't.

AMD should be investing more in manufacturing process technology. They need to be leading Intel in that area, not a year behind and growing.

AMD lost over $600 million this year. If they had 45nm technology, they probably would have been profitable. Either they spend that extra money on engineering... or they will fall further and further behind and become bankrupt.

If you're going to lose the money anyways... why not lose the money by creating better products... and go down fighting... rather than losing the money because you're becoming a dinosaur.

By crystal clear on 12/13/2007 11:06:08 PM , Rating: 2
<quote "We have gone through a very difficult time, reacted quickly and decisively and we are on our way to really have, I believe, a phenomenal transition year in 2008," Ruiz said.

If the above was a comment on D.T. forums,it would have been voted down to RED.

What transition !when they are still on 65nm with NO 45nm in sight Only announcements thats all !
Intel is on 45nm product line - racing to 32nm to be ready 2009.

Who wants a previous generation product-may be good for 3rd world markets.

We need an AMD on par with Intel with a matching product.

Time to delivery.....nothing less than that.

not seeing the riches
By goku on 1/3/2008 3:21:40 PM , Rating: 2
My friend's uncle is dave orton, he is still the same rob orton that I know so what's the deal? He isn't ballin or anything..

By mankopi on 12/13/07, Rating: 0
Good News
By Tsuwamono on 12/13/07, Rating: -1
RE: Good News
By Anosh on 12/13/2007 6:55:16 PM , Rating: 2
I've heard so much talk from AMD and no concrete results that I find my self not really believing what AMD says.

So I guess I'll believe it when I see it.

RE: Good News
By Etern205 on 12/14/2007 11:45:46 AM , Rating: 1
You sir, gots a mind of an igloo.

RE: Good News
By Etern205 on 12/14/2007 11:48:03 AM , Rating: 2
Is there a new rating on DT?
I mean after I posted the above comment it starts with a rating of 1.

RE: Good News
By Tsuwamono on 12/16/2007 11:26:57 AM , Rating: 1
lol i love how i got rated down by the Intel Fanboys..

By TomZ on 12/13/07, Rating: -1
RE: Denial
By retrospooty on 12/13/2007 6:46:14 PM , Rating: 2
Yup... I would advise Hector and company to do this.

1st - start executing to plan, without errata that stifles performance, THEN analyse the results and predict profitability if its there.

AMD cant seem to execute at all lately, and has shown zero signs of turnaround so far.

RE: Denial
By TMV192 on 12/13/2007 7:01:14 PM , Rating: 2
They are behind and I'm pretty sure AMD knows their situation, but in a lot of industries, its not so easy to shoot back up like that. AMD is excepted to take a lot of losses and what Hector Ruiz is trying to do is just keep the investors happy

RE: Denial
By Vanilla Thunder on 12/13/2007 7:13:21 PM , Rating: 3
The first step in fixing a problem, is admitting that you have one.


RE: Denial
By Lazlo Panaflex on 12/13/2007 11:50:40 PM , Rating: 2
lol...hey Hector, denial ain't a river in Egypt

RE: Denial
By mforce on 12/14/2007 5:25:55 AM , Rating: 2
I was once called an AMD fanboy , I only used AMD CPUs so far but I really liked that one , that's funny :)).
Now if AMD could just go back to actually making CPUs and stop talking nonsense and future plans.
Sure , the K8 was a good CPU core back in its days but how maybe it's time for a change. The K10 didn't improve much IMO and having a native quad core , well it won't help if you don't have good performance.

RE: Denial
By crystal clear on 12/14/2007 7:14:30 AM , Rating: 2
"We all know art is not truth. Art is a lie to make us realize the truth."

Figure it TOM.....

RE: Denial
By Missing Ghost on 12/14/2007 8:11:54 AM , Rating: 2
"We have gone through a very difficult time, reacted quickly and decisively and we are on our way to really have, I believe, a phenom enal transition year in 2008"

Oh, really?

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