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Dave Orton (ATI) and Hector Ruiz (AMD) shake on the deal
The wait is over, ATI and AMD have sealed the deal

The official AMD-ATI announcement is still three hours away, but AMD sent the newswire out a few hours early.  For those still in doubt, occasional DailyTech blogger and T-Break Editor-In-Chief Abbas Jaffar Ali was able to sneak an image from the conference already; and a picture is worth a thousand words.

AMD announced the deal is valued at around $5.4B USD: $4.2B in cash and 57M shares of AMD common stock (valued at a little over $18 USD per share as of July 21, 2006) will be used to purchase the ATI in a takeover bid.  A little more than half of the cash to be used from the transaction will come from a $2.5B USD loan from Morgan Stanley, which was the bank quoted Saturday when the news of this story first broke.  This is in addition to the $5.8B USD the company plans to invest in Dresden, Germany over the next three years and the $3.5B USD slated for a new semiconductor facility in Luther Forest, New York.  ATI was a fabless semiconductor company, meaning the company relied completely on third-party facilities to manufacture its ASICs. Although AMD certainly will have semiconductor fabrication, the company is already hard-pressed to keep up with CPU demand.  AMD President Dirk Meyer emphasized that AMD will not use its in-house facilities for ATI semiconductors at this time, especially with the TSMC and UMC opportunities that are already available.

AMD's press release also claims that the combined company would have had approximately $7.3B in sales over the last four quarters and just under 15,000 employees.  The new company keeps the AMD headquarters in Sunnyvale, California, and the previous ATI headquarters will act as a business hub for part of the company.  ATI's previous CEO Dave Orton will act as executive vice president of the ATI division and report directly to Hector Ruiz and Dirk Meyer.  AMD's press release indicates that ATI will, for now, act as a division of AMD.  In the event the takeover falls through, ATI must pay AMD a termination fee of $162M to cover AMD's initial investments and lendings. AMD CEO Hector Ruiz also confirmed that there will not be any significant layoffs as a result of the takeover.

The merger is more than a small shakeup for the industry.  NVIDIA, AMD's number one supplier of core logic for AMD platforms, is also a direct competitor of ATI for discrete and integrated graphics.  Jaffar Ali was able to reach NVIDIA's Director of Product PR EMEA, Luciano Alibrandi, who claims "Our PC strategy is to be the leading innovator of GPU and core logic for both Intel and AMD platforms. GeForce is the #1 GPU brand. Quadro is the #1 professional and workstation graphics brand. nForce the #1 core logic brand. And SLI is the #1 multi-GPU brand. They are specifically sought out by end users of both Intel and AMD processors. Today's announcement only enhances our strategy."  It appears definite that NVIDIA will approach the Intel market with much more vigor than in the past, though no NVIDIA representatives would comment on whether or not the merger will result in a scaling back of NVIDIA AMD components.  AMD President Dirk Meyer added "With regard to GPUs: I fully expect ATI's solutions to compete with NVIDIAs on the AMD platform."

Microsoft had already voiced its opinion in the AMD press release when Jim Allchin, Co-President of Microsoft’s Platforms and Services Division, claimed "We're excited by the potential of what AMD and ATI can deliver together to enhance the Windows Vista experience for our customers even further."  Since it may take years for the AMD takeover to really kick into effect, it may take some time for customer-ready products to hit store shelves.

The addition of in-house core-logic also strengthens AMD's presence in the server market.  A portfolio manager for AMD, who wishes to remain nameless for now, told DailyTech "[I] doubt AMD will have the price flexibility to bundle ATI chipsets (18% gross margin) until they bring the manufacturing in-house. Available capacity for that is still down the road."  The same manager went on to claim that without total reliance on Broadcom for server core-logic the company will have much better success securing major deals for large quantities of server products.  All of these products will now be obtained through the single AMD channel instead of multiple vendors -- the company previously prided itself in diversification of channel solutions until the Dell picked up AMD to provide server products.

The deal still needs to receive approval from the AMD and ATI shareholders, and then pass FTC and Canadian Competition Bureau approval. AMD recently announced that the company would cut back its Geode research, while almost simultaneously selling the AMD Alchemy division.  This departure of low-end x86 and non-x86 presence is in stark comparison to ATI's recent purchase of Bitboys Oy.  Many of the Alchemy processors AMD recently spun off competed (at least indirectly) with ATI Imageon products -- many of which will show up in the new Nokia devices and digital TVs. AMD will also gain a significant presence with the Microsoft XBOX team, as ATI designed the XBOX 360 graphics processor and the XBOX 360 HD DVD H.264 decoder.



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How does this change things now?
By appu on 7/24/2006 6:40:39 AM , Rating: 3
1.) Intel chipsets allowed ATI's crossfire but not nVidia's SLI.
2.) nVidia and AMD have been very good to each other so far.
3.) With Vista coming up, Intel has a huge opportunity to cash in on the (very huge) integrated graphics market by coming up with a 3D-accelerated DirectX9-compatible integrated graphics controller - this is definitely not beyond them.
4.) AMD opening up their HTX to third-party vendors to create "accelerators".

Interesting to see where everyone goes now with this. Intel has had the upper hand over AMD when it comes to chipsets. Maybe things will change now with AMD leveraging ATI's expertise. Maybe I'm too naive, but what's the benefit for ATI in this deal?

nVidia is probably too big to be taken over by AMD, but Intel definitely can I think, should they wish to. However, nVidia probably has its own designs.

This is going to be really yummy!




RE: How does this change things now?
By Clauzii on 7/24/2006 6:55:16 AM , Rating: 2
You meant DX10 GPU I hope :)


RE: How does this change things now?
By RichUK on 7/24/2006 7:50:37 AM , Rating: 2
Yeah thats right, Intels next IGP will be designed for DX10, this will be out by the end of this year i believe.


RE: How does this change things now?
By Xavian on 7/24/2006 7:47:10 AM , Rating: 2
actually Nvidia is smaller then ATi (because of ATi's more successful forays into the mobile graphics sector), so there really is no reason to buy ATi over Nvidia.... strange they would take this action though.

Maybe a prelude to making Intel Chipsets SLI/Crossfire-less?


RE: How does this change things now?
By defter on 7/24/2006 7:58:17 AM , Rating: 2
quote:
actually Nvidia is smaller then ATi


That's not true, market caps:
NVDA: $6.26B
ATYT: $4.2B

last quarters revenue:
NVidia: $681M
Ati: $652


RE: How does this change things now?
By Xavian on 7/24/2006 8:02:50 AM , Rating: 2
so it is i stand corrected.


RE: How does this change things now?
By GoatMonkey on 7/24/2006 8:10:58 AM , Rating: 2
It is smaller in terms of market share though...

http://www.xbitlabs.com/news/video/display/2006052...

I think most of the GPUs from ATI are the cheap integrated ones in either mobile devices or built into motherboards. Which is good for market share, but apparently not so good for overall revenues. I wonder what the actual profit margins are like for the two companies.



RE: How does this change things now?
By TomZ on 7/24/2006 8:23:11 AM , Rating: 1
quote:
It is smaller in terms of market share though


Caveat (from the same article):

ATI Technologies is the second, however, its higher position relatively to Nvidia Corp. is conditioned by increasing shipments of core-logic sets with integrated graphics cores


RE: How does this change things now?
By Samus on 7/24/2006 2:24:31 PM , Rating: 2
ATI makes a lot of inexpensive, onboard-class solutions, nvidia makes a lot of inexpensive, mid range and high end solutions. The profit margin on mid-to-high-end products is greater, hence more profit. ATI still holds more market share, just not as much revenue.


RE: How does this change things now?
By appu on 7/25/2006 12:20:42 AM , Rating: 2
@Clauzii: Yes, I meant DirectX10 GPU. Sorry for the typo. :)

quote:

I think most of the GPUs from ATI are the cheap integrated ones in either mobile devices or built into motherboards. Which is good for market share, but apparently not so good for overall revenues. I wonder what the actual profit margins are like for the two companies.


I think this makes sense. It might be a small market in terms of revenues but now I think AMD has a big opportunity to cash in on the new DX10-accelerated GPU demand in the graphics-integrated chipset market. Once you get your toe in, you can always barge your way through, I guess. Not a bad strategy in my book.


RE: How does this change things now?
By akugami on 7/24/2006 12:34:45 PM , Rating: 2
Market Cap: The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. here also called market cap or market capitalization.


As anyone who remembers the .com days, right before the bubble burst, market cap is hardly a reliable indicator of a company's size. I do agree that nVidia is the larger company but not because of market caps. I think a better indication of a company's worth is the total value of it's intellectual properties as well as it's revenues and profits.


RE: How does this change things now?
By TomZ on 7/24/2006 2:13:13 PM , Rating: 2
quote:
I think a better indication of a company's worth is the total value of it's intellectual properties as well as it's revenues and profits.

LOL, that's what the market cap is - the market's judgement of the value of the company, exactly as you said.


By akugami on 7/24/2006 4:50:52 PM , Rating: 2
Nope. I'm not including stocks in there. We all know stocks can be vastly inflated and be worth way more than what the revenues as well as the intellectual properties are worth. Which is why I say the market cap is a bad indicator of a companies net worth. Market cap is partially based on the predictions of how a company will do which as we all know in reality can be much much much much different from the fantasy land that some investors live in. Just ask the .com investors.

Maybe I'm just wording it wrong. I just feel that including stocks in a companies net worth is not that reliable due to the inflation of some stocks beyond what would be reasonable considering what the company makes. I'm probably thinking more in the lines of net assets (since it's a company) with an outlook on how the company is doing by looking at it's revenues and profits.


:O
By Clauzii on 7/24/2006 5:38:08 AM , Rating: 2
CONGRATULATIONS!

There are interesting times ahead!




RE: :O
By Clauzii on 7/24/2006 5:40:46 AM , Rating: 2
BTW. AMD paid ATI $5.4B in a mix of cash and shares.


RE: :O
By tuteja1986 on 7/24/2006 5:55:56 AM , Rating: 2
I hope to god nothing happens to ATI high end GPU. Other than that i happy : )

We need ATI and Nvidia to fight with each other : )


RE: :O
By Clauzii on 7/24/2006 5:59:12 AM , Rating: 2
More than they do know? :O


RE: :O
By Clauzii on 7/24/2006 6:23:27 AM , Rating: 2
know = now


RE: :O
By Clauzii on 7/24/2006 6:28:00 AM , Rating: 2
I wrote the price before K.K. ;)


RE: :O
By KristopherKubicki (blog) on 7/24/2006 6:32:32 AM , Rating: 2
Yeah, but I was busy writing the rest of the article :-P


RE: :O
By Clauzii on 7/24/2006 6:53:31 AM , Rating: 2
:)
I know, but I had to point it, since otherwise I would look like an total idiot repeating the article ;)

... which is good btw.


RE: :O
By SunAngel on 7/24/06, Rating: -1
RE: :O
By SunAngel on 7/24/06, Rating: -1
RE: :O
By SunAngel on 7/24/06, Rating: -1
RE: :O
By One43637 on 7/24/2006 1:53:20 PM , Rating: 2
quote:
by Clauzii on July 24, 2006 at 5:38 AM

CONGRATULATIONS!

There are interesting times ahead!


indeed.


No more Catalyst Control Panel please!
By MrCoyote on 7/24/2006 10:29:28 AM , Rating: 2
CCC sucks and is a memory hog. Please go back to supporting the regular display panel!

So now we will be forced to buy ATI cards for any AMD mainboard? Especially to operate "properly"?

This sucks big time. Now it's time for another contender to enter the market, like [b]3DFX[/b] did in the past! I do not like mergers and particularly this one IS very odd! As much as I like AMD and ATI, I'd rather have them as seperately owned legal entitys! This is just as bad as [b]Electronic Arts[/b] buying out all the small game development houses!

P.S.
What is [b]Dell[/b] going to do now about embedded graphics? Intel only? Dell has been using ATI and Intel graphics chips in servers.




RE: No more Catalyst Control Panel please!
By MrCoyote on 7/24/2006 10:30:18 AM , Rating: 2
Another P.S.

Dave Orton was a fool to sell!


RE: No more Catalyst Control Panel please!
By wingless on 7/24/2006 10:48:56 AM , Rating: 2
Canadians tend to sell out. Arent they still owned by the United Kingdom and the Queen?


RE: No more Catalyst Control Panel please!
By Merglet on 7/24/2006 8:24:21 PM , Rating: 2
"Canadians tend to sell out. Arent they still owned by the United Kingdom and the Queen?"

Are you *trying* to start a flame war? Such a blanket statement shows how incredibly ignorant and uneducated you are. I would have to guess that either you're a teenager, or a very young, and immature adult. What's your next statement, all Mexicans are lazy?


By Ab2kgj on 7/24/2006 11:10:08 PM , Rating: 2
"Are you *trying* to start a flame war? Such a blanket statement shows how incredibly ignorant and uneducated you are. I would have to guess that either you're a teenager, or a very young, and immature adult. What's your next statement, all Mexicans are lazy?"

Dude, it's a joke. laugh and chuckle at yourself, we're talking about a country that has someone else's queen on their money.

And by the way, who's starting the flame war here? You;re the dude with their undies in a bunch.

Besides, Canada's just a loft apartment over a great party : )=)



Hopefully for the better
By lifeblood on 7/24/2006 8:57:54 AM , Rating: 1
AMD, please please please fire all the ATI driver programers. ATI makes good hardware which is held back by it's horrible drivers. Hire some decent programers and unleash the beast.




RE: Hopefully for the better
By Master Kenobi (blog) on 7/24/2006 9:04:50 AM , Rating: 2
Dunno what you've been smoking but the ATI drivers are as good or better than the nVidia ones in the past few months.


RE: Hopefully for the better
By Thmstec on 7/24/2006 9:56:36 AM , Rating: 2
Agreed except for the CCC lag. Of Course Nvidia just managed to lag the 90 series drivers too, just 2 seconds instead of ATI's 5.


RE: Hopefully for the better
By hstewarth on 7/24/2006 11:02:32 AM , Rating: 2
Right now its doesn't look better - at least in the stock mark - intel is slight up but AMD is more than 4 times that down. But its early.


RE: Hopefully for the better
By Josh7289 on 7/24/2006 3:21:00 PM , Rating: 2
I agree with this. ATI can't even properly implement simple 1:1 pixel scaling on LCDs in their drivers, while Nvidia has had this feature working fine since they introduced it, and that is the main reason I don't buy ATI video cards.


What about nVidia and Intel?
By hstewarth on 7/24/2006 8:56:34 AM , Rating: 2
This is going to be really interesting for nVidia. I would think that nVidia would not desired AMD ( and its ATI ) to have some of its secrets, so this likely means less action between nVidia and AMD - which will primary hurt them in the nForce motherboards.

As far Intel is concern, it would probably be best to talk to nVidia and improve relations between the two companies.

Maybe there will be a nForce Pro chipset for the Woodcrest coming soom.




RE: What about nVidia and Intel?
By hstewarth on 7/24/2006 8:58:16 AM , Rating: 2
One this statement doesn't mean that Intel and nVidia will joined together.

I personally think that the companies should be seperate and that joining a large cpu company with a large gpu company is a bad idea for the industry.


RE: What about nVidia and Intel?
By hstewarth on 7/24/2006 6:25:31 PM , Rating: 2
I guess the market thinks differently, stocks today and speculation of agreement between Intel and nVidia.

http://money.cnn.com/2006/07/24/technology/nvidia_...

What is needed is not ownership of companies but better communications between them.


RE: What about nVidia and Intel?
By Eris23007 on 7/24/2006 8:46:30 PM , Rating: 2

Yeah, I'm predicting a "strategic alliance" at the *least* among Intel & NV in order to counter this development.

I agree that an Intel-NV buyout is questionable due to anti-trust concerns as well as significant duplication of resources among Intel & NV - they do so many of the same things, it would probably result in lots of layoffs if they did actually do a buyout. That said, a strategic partnership makes a lot of sense...


Merger
By aGreenAgent on 7/24/2006 1:10:33 PM , Rating: 2
The fact is that this benefits both companies.

AMD is behind Intel in the chipset/GPU area, mainly because AMD just doesn't make them at all. AMD is taking a significant step into the chipset/GPU market by acquiring ATI. AMD also now has an in-road to MS, Sony and Nintendo via ATI's previous console dealings.

ATI stands to gain a lot by this, too. ATI can't produce their own chips - they will be able to in the future when AMD gets all their fabs built. Also, ATI will get some insane investment capital. The entire company of ATI just sold for 5.4B, but it's no problem for AMD to drop that much on a new fab. AMD can easily just pump in a billion to ATI R&D or something along the lines - AMD has the cash for that, ATI didn't.




RE: Merger
By Master Kenobi (blog) on 7/24/2006 1:23:34 PM , Rating: 2
I think the issue is that AMD doesn't have the cash for that. They needed alot of incentives to build a new Fab in New York. They had to take out a substancial loan of 2.5B USD to acquire ATI. ATI and AMD have been in a bit of a slump for the past few months. Their revenues are down, and with Intel rolling out its Core 2 Duo, as well as a very agressive roadmap, AMD is just starting into some rough waters. With some luck ATI will be a large revenue generator and will help to ease the burdeon that Intel is going to put on AMD in the CPU arena for the next few years. This all depends on the fact that nVidia doesn't One up ATI in the graphics market, which could very easily happen.


RE: Merger
By aGreenAgent on 7/25/2006 2:31:57 PM , Rating: 2
Not that AMD is an insanely wealthy company, but in terms of assets and abilities, AMD has a much bigger upper hand.

Remember, ATI is fabless, AMD has a few fabs plus a few coming.

My point is that ATI gains access to a whole lot of resources they otherwise wouldn't have access to.


RE: Merger
By geekfool on 7/24/2006 1:41:17 PM , Rating: 2
So why the hell they sold their AMD8000 chipset designs to ALi/ULi? (which by the way is now owned by their subsidiary's rival, odd)

.


I knew it , I knew It, I knew it.
By Dfere on 7/24/2006 8:28:57 AM , Rating: 2
Well, I sort of did.

With the articles on the sale of Geode, I asked if anybody knew something I didn't. Someone did, but apparently could not say......

It didn't make sense as a stand alone act. It did make sense to sell something you suspected the FTC might require you to- you get a better price prior to a merger.

I don't think this is going to result in price decreases, however as overall competition in a couple of markets is actually going to decrease.




RE: I knew it , I knew It, I knew it.
By TomZ on 7/24/2006 8:49:11 AM , Rating: 1
quote:
It didn't make sense as a stand alone act. It did make sense to sell something you suspected the FTC might require you to

Why do you feel that FTC would oppose the merger if AMD hadn't divested its Geode products? I don't see the connection there.


RE: I knew it , I knew It, I knew it.
By Torched on 7/24/2006 1:04:09 PM , Rating: 2
quote:
With the articles on the sale of Geode,


Geode was not sold. The division was moved over to the embedded opterons. They are still selling the chips. The Alchemy(MIPS) proccessors were sold though. I doubt either move has anything to do with the ATI aquisition as there is plenty of competition in the embedded markets of which ATI does not compete in.


RE: I knew it , I knew It, I knew it.
By TomZ on 7/24/2006 2:16:26 PM , Rating: 1
quote:
Geode was not sold.

You're right, AMD only closed their Geode Facility, which is not the same as selling the IP, etc. I also initially misunderstood this.

http://www.dailytech.com/article.aspx?newsid=3363


Ill miss the 7 years of AMD/NVIDIA that Ive had.
By wingless on 7/24/2006 10:47:51 AM , Rating: 2
My main problem is that Ive been an AMD/nVidia guy for 7 years. My world has been turned upside down. For the time being, I think I have to go with an Intel Core 2 6600, or cheapy 6300. Ill go AMD/ATI in 2008 or 9 when they get their shit together and show me the baddest assed hardware Ive ever seen (and they have the resources to do that now too...). Quite frankly I just want a fast computer and anything is faster than what I currently have. A Core2 6300 is about 4 times faster than my rig.

My current rig is an AthlonXP 2100+@2400mhz aircooled, 2GB DDR500, nForce2 Ultra 400 ASUS mobo, 6800 AGP unlocked.

I shed all loyalties. My loyalty is too the highest performer for now on. Im going Intel the day Core2 Duos hit newegg.com...




By Master Kenobi (blog) on 7/24/2006 10:55:44 AM , Rating: 2
Agreed. I've been on the Intel/ATI line for a long time myself. I've already ordered a new mobo for the Core 2.
ASUS P5W DH Deluxe.
I'll order the 6600 Core 2 Duo when I see it up there.
For now I'll keep using my X1900XTX.
In the future, Guess I'll be migrating over to nVidia/Intel, and as always Corsair RAM :P


By wingless on 7/24/2006 7:28:30 PM , Rating: 2
We'll have nearly identical systems =)


AMD-ATI: A Done Deal
By micro on 7/24/2006 6:12:50 AM , Rating: 2
not so happy about this.nvidia done great job for amd platform with their nforce line, we will see what will come from this.




RE: AMD-ATI: A Done Deal
By Kim Leo on 7/24/2006 6:35:24 AM , Rating: 2
don't think this will change that?, Ati might become better but nVidia will still be competing in the chipset-market


RE: AMD-ATI: A Done Deal
By AlexWade on 7/24/2006 7:37:26 AM , Rating: 1
Don't cry for NVidia. Their NForce3 drivers for XP x64 are still in beta and over a year old. And they have a major unfixed bug for SATA drives. Because of NVidia's blatant lack of care for older products, I was never going to buy or recommend an NVidia chipset ever again.


Numbers don't add up
By deeznuts on 7/24/2006 2:11:13 PM , Rating: 2
How does $4.2B in cash, and $57M in stock equal $5.4B? I think the article needs to read 57 million in stock at $18 for the numbers to add up, no?




RE: Numbers don't add up
By Tuan Nguyen on 7/24/2006 3:03:04 PM , Rating: 2
Thanks. Fixed.


Tuan


Im going to my nearest bank to...
By Regs on 7/24/2006 5:59:41 PM , Rating: 2
Take out a 4 billion dollar loan. Woo. I Hope AMD can actually make a profit after the loans get payed off.




By Ab2kgj on 7/24/2006 11:17:48 PM , Rating: 2
If i had the energy to go down to a brokerage, I would invest some money in this company now! AMD dropped the price of their stock in order to use some of those investment assets to make a purchase. That stock price is going up unless the company totally tanks...doubtful.


Let's wait for best platform
By fikimiki on 7/24/2006 5:43:39 AM , Rating: 2
I expect 2xCrossFire+AM2 CPU+PPU as the best priced gaming platform soon.




good
By MAIA on 7/24/2006 7:02:14 AM , Rating: 2
This is good news ...

Now ATI will have a significant lead in terms of manufacturing processes regarding Nvidia. Let's see what the "green" company pulls out of its sleeve ...

Spicing up the market baby ;)




Aww...
By Some1ne on 7/24/2006 3:30:27 PM , Rating: 2
I just wish AMD had purchased nvidia instead, just to see what the next-gen nforce platform chipset would have been like with the two firms partnered.




Im going to my nearest bank to...
By Regs on 7/24/2006 5:59:40 PM , Rating: 2
Take out a 4 billion dollar loan. Woo. I Hope AMD can actually make a profit after the loans get payed off.




Fewer choices
By RogueSpear on 7/25/2006 12:08:20 AM , Rating: 2
Fewer choices for the consumer is all I see out of this. I guess things were going in that direction anyway, but this really solidifies it. There may be some token offerings where you can mix and match Intel\ATI or AMD\nVidia but we can all see where it's headed.




YEEHAW! REDNECKS UNITE!
By SunAngel on 7/24/06, Rating: -1
"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer














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