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Reports claim a $5.6B deal is about to close on an unprecedented merger

According to a report in The Globe and Mail, the board of directors at AMD has allegedly approved the takeover of Canadian graphics firm ATI Technologies. The report claims that the information was released by an investment banker that was part of the discussions. According to other sources, AMD executives were also seen at ATI's headquarters in Markham, Ontario. The report indicated that AMD is considering a $5.6 billion takeover bid for ATI.

Speculation and rumors have run rampant over the last several months about the possible merger between AMD and ATI, but no concrete details have been revealed. According to reports on ATI's share prices, the company's shares have been trading at double the usual volume today. Analysts said that AMD would be making an offer of 20 to 40 percent premium to ATI's current share price. ATI shares traded at $16.12 on the NASDAQ today during after hours, which is up 39 cents from yesterday's closing.

Reuters has also picked up on the story, claiming that "Some analysts have questioned the rationale for an AMD-ATI merger, and others were surprised that the speculation received no attention from analysts during AMD's earnings conference call on Thursday."  DailyTech had punched in for question during the investor conference call on Thursday, but a moderator would not respond.

According to Eric Gomberg, an analyst for investment bank Thomas Weisel Partners, "there has been considerable industry speculation that AMD may pursue an acquisition of ATI Technologies, although such an outcome is by no means certain." Gomberg's comment came in earlier this week, but word circulating around investment bankers who are aware of the talks between ATI and AMD surfaced just several hours ago.

Recent reports indicated that Intel roadmaps no longer included ATI chipsets. Although Intel had been producing motherboards using ATI logic, upcoming boards like those that support Core 2 processors are void of any chipset from ATI. Interestingly, ATI and Intel had agreed to several cross-licensing programs that allowed them to take advantage of some of each other's technologies. Several analysts however, indicated that the merger between AMD and ATI to be "out of strategy for AMD and out of focus. Stupidity is no barrier to tech mergers."

A report in the Wall Street Journal confirms the talks between AMD and ATI (subscription required) today. Although the deal is not final, the report said that representatives from both companies declined to comment.

AMD has previously indicated that it would embrace embedded processor technologies for its Torrenza platform -- some of which would include math and physics co-processors.  However, the company has recently exited all non-x86 processor design.

Update 07/24/2006: AMD and ATI jointly announced the confirmation of the $5.4B merger today (July 24, 2006)

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my 1.2453434 cents
By cciesquare on 7/22/2006 3:58:39 AM , Rating: 5
I think this along with recent events, this does have a correlation. Lets start with allegations of Intel using unfair competition, then followed by a string of law suits. Now this aquistion. The question is what's all this have to do with anything?

I think it is about AMD's image. They are trying to change their image in a very very dramatic way. AMD has always been seen as the hidden brand, they have been in the shadows. The law suits and the mega aquistion, is a statement, sorta like a coming out party saying "Hi, we are AMD."

I think this is a huge huge huge gamble by AMD, whether they know what they are doing or not, miss managing ATI will give investors, customers and the public a glimpse at AMD's management and its ability to handle a growing company. To put it simply AMD is in the hot seat, if they mess up, they will be in a lot of trouble. Not to mention destroying a quality brand name in ATI, and down $5 billion dollars.

RE: my 1.2453434 cents
By Torched on 7/22/2006 9:00:13 AM , Rating: 2
Actually, AMD manages the channel better than Intel. Look at the Intel chipset allocation problem at the beginning of this year...
You could also look at how Fab 30 in dresden is at 150% capacity.
The only thing I would worry about is marketing, AMD's sore spot.

RE: my 1.2453434 cents
By lethalchronic on 7/22/2006 12:22:56 PM , Rating: 2
Amen, if AMD got some serious marketing together they go go sky high. I mean come on whens the last time anybody saw an AMD commercial on prime time tv. What about Intel, remember blue man group?

IMHO, this just leave a huge gap of potential for AMD, they might actually catch up to the massive gap in market share that Intel has been enjoying, albeit it might take a good while, maybe K9 (or is it K10 I've heard both but nothing is official anyway).

RE: my 1.2453434 cents
By TomZ on 7/22/2006 1:01:28 PM , Rating: 2
Sorry, I disagree. AMD is going to need great products and great marketing and great manufacturing and great prices to continue to win market share from Intel. Marketing alone won't be the solution. AMD needs to again leapfrog Intel in terms of product architecture again if they want to play at the next level.

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