Amd To Buy Ati

[xboxrulz1405241485 0]

ATI takeover 'game changer'

Analysts call takeover an industry `game changer'

Jul. 25, 2006. 07:02 AM

TARA PERKINS

BUSINESS REPORTER

 

Advanced Micro Devices Inc. has "bet the firm" with its $5.4 billion (U.S.) acquisition of Markham-based ATI Technologies Inc., analysts said, and some believe the company is making a mistake.

 

While analysts expressed scepticism about the company's future, they said the price of the long-rumoured friendly deal is good news for shareholders of 20-year-old ATI, which is listed on the Toronto Stock Exchange and the Nasdaq.

 

ATI's shareholders will receive $20.47 per share, made up of $16.40 in cash plus 0.2229 of an AMD share, based on Friday's closing stock price. That's a 24 per cent premium to Friday's closing price, and ATI shares had already gained more than 5 per cent since then as rumours of the deal leaked out, noted RBC Capital Markets analyst Steve Arthur.

 

Overall, that's a "pretty hefty premium," Morningstar analyst Alex Ross said.

 

The deal, which was officially unveiled yesterday, will be a "game changer, impacting the graphics industry at essentially all levels of the food chain," Arthur said.

 

The combined company, to be based in Sunnyvale, Calif., would have about 15,000 employees and plans to deliver new integrated open platforms beginning next year in such areas as mobile computing, consumer electronics, commercial clients and gaming.

 

ATI's chief technology officer, Adrian Hartog, said in an interview that ATI has held discussions about other potential strategic options and feels "that by combining with AMD, that gives us the best opportunity."

 

The industry is dominated by a handful of major players. AMD is the world's second-largest semiconductor maker after Intel Corp., the world's largest chip maker.

 

ATI is a leading supplier of chip sets for cellphones and digital televisions, he said, sectors that are transitioning. With AMD, "there are broader technologies we can draw on," he said.

 

The deal, which requires approval from shareholders and regulators, would be the biggest in AMD's 37-year history.

 

The firms have been in discussions for about four to six months, Hartog said, adding that the firms have "committed to grow our Canadian presence, particularly right here in Toronto." The company's operations in the Markham area will be one of its largest, with about 2,500 employees.

 

But many analysts were skeptical about AMD's future if the company swallows ATI.

 

"I think for AMD it is a mistake," said Hans Mosesmann of Moors Cabot Capital Markets. "I think they're doing it for the wrong reasons. Over time, as a diversified semiconductor company, it will be tough to beat Intel in processors and Nvidia in graphics chips," he said, calling the deal "a tactical blunder."

 

"They're going to assume a significant amount of debt, they're quadrupling capacity over the next three years," Mosesmann said."Why AMD decided to `bet the firm' on this transaction is a matter for AMD shareholders to judge," BMO Capital Markets analyst Brian Piccioni wrote in a note to clients yesterday.

 

He added that "ATI management deserves kudos for extracting a premium valuation, despite recent underperformance and a poor outlook for the firm."

 

Piccioni also said the deal could be a boon for ATI's main competitor, Nvidia.

 

"Because AMD has essentially eliminated ATI as a competitor to Nvidia in the larger ATI market, we believe that, while it may not be immediately evident, this transaction may be the best thing to happen to Nvidia in a long time," Piccioni wrote.

 

AMD director of worldwide commercial marketing, Bruce Shaw said "the industry is aggressive at the moment," but he doesn't see that changing.

 

"This partnership only makes these two companies stronger," he said, adding it will allow AMD to pursue the mobile and commercial client markets in a way it hasn't done before.

 

Source: The Toronto Star

 

This deal will not benefit many people including AMD and ATI, IMO. Especially, this will weaken our Canadian Economy as most of the sales and profits will divert to another country away from Canada. Furthermore, NVIDIA will now have the upper hand after the acquisition is completed.

 

It's IMO of course.

 

Comments?

 

xboxrulz

Edited July 26, 2006 by xboxrulz (see edit history)

[nightfox1405241487 0]

Yeah, I'm a little "mixed" on this too. On one hand, it seems good. On the other hand, it's like "OMG! We made a mistake!". I'm not sure how to see the acquisition. From a business stand point, it's like "They just want the money" but from the end user stand point, it's like "wow... what's going on here?!"[N]F

[xboxrulz1405241485 0]

ya that's true ... the freaky thing is that my family drive pass the ATI HQ regularly and now, I always think 'bout the acquisition whenever we drive pass it. The building is only a couple major blocks from my house anyways....*P.S: sweet! I just reached my 888th post and as all Chinese people know it, it's a really lucky #!*xboxrulz

Edited July 26, 2006 by xboxrulz (see edit history)

[Jeigh1405241495 0]

I dunno, I don't think we can call this one, there are alot of possible ways for this to turn out really well or really poorly. If they manage to come up with an innovative solution to something that either company alone could not do, possibly it'll be the best move the company ever made. If they simply end up thinning their resources amongst a two front war? Probably won't end well at all. Only time will tell I guess.

[Darren1405241470 0]

This is a tricky one, I have no idea what direction AMD are planning to go with their new aquisition, but after thinking about the progress they've made over the past few years I would tend to trust that they know what they are doing. $5.4 billion is a big gamble to play.

[Hercco 0]

I was realyl surprised by this move from AMD. It's obvious that this is going to change a lot of things, especially in the graphics chip side but I wouldn't be surprised if AMD pulls something new to the processor war too. Certainly they now have an edge against Intel in integraring graphic card functionalities to CPUs.

[Logan Deathbringer 0]

It sounds interesting and has massive potential for AMD but also has a lot of downsides to it. While it gives AMD inhouse chipset design it also gives Intel another company to totally alienate. Granted most of the chipsets used by Intel Proc boards are NForce based but with the AMD buyout I see the ATI chipset and GPU's becoming almost a AMD only product, since Intel will probably get even more friendly with NVidia and make it so that their Procs will only work with NVidia chipsets.Also it gives rise to the thought of an onboard GPU that interacts directly with the CPU through the new HT2 designs that AMD is developing thus reducing, if not eliminating, the communication between the CPU and GPU as a bottleneck.

[xboxrulz1405241485 0]

I was just talking to my friends about this today and they too think it's a bad idea because that'll make the competition less balance and favour NVIDIA because ATI is practically removed from the scene.xboxrulz

[BitShift 0]

Why can't AMD make the smart decision and have bought NVIDIA.AMD relies so heavily on the NVIDIA chipsets ( NFORCE 4 and NFORCE 5 ).NVIDIA provides the best chipset that AMD uses for its AMD64 line of processors.\I don't understand why they did this. NVIDIA might stop giving so much support on the NFORCE 4 for amd thinking that ATI will now take up the burden for providing AMD's chipsets, which puts a heavy weight on the ATI company, giving them another thing to focus on rather then their own needs.I don't know much about the issue but it sounds like it was done for fast/easy money more then anything

[Tarin 0]

 

In the toronto stock exchange, ati seems to be doing a lot better after amd has bought it. Also according to the tsx, the market value is 5.8 billion, amd made 400 million dollars from their transaction.

 

some people are expecting intel to buy nvidia which i seriously doubt. Nvidia is worth 8 billion dollars(according to nasdaq). A LOT more than ati. this should explain why amd didnt buy nvidia.

[xboxrulz1405241485 0]

remember, the acquisition is NOT COMPLETED yet. They just announced it. The government of Canada, the town of Markham and the ATI shareholders MUST agree first before the acquisition can take place.I would propose to the town of Markham to vote no, but I don't really have that power since I live in the town next to Markham.Anywho, this boost is just short term since this is just the news of the acqusition. I'm thinking LONG term. It is bad for ATI in the LONG term.As per acquiring NVIDIA, NVIDIA never wanted to be purchased. Even if they were up for sell, it's too expensive for AMD to do so. However, Intel has a bigger chance if they were to acquire NVIDIA because they have the money to do so.xboxrulz

[Vaibhav1405241528 0]

well...I dont htink that AMD is BUYING ATI...they just buying some shares! And as far as the USERS are concerned, I think that the ComBO is going to ROCK the uSERS. Certainly they will improve their already good processor which rocks at the gaming end...The only hiccup with AMD I saw was in the area of ENCODING. it encodes and decodes Music and Video files VERY VERY slowly! But I think that ATI with thier expertise in the Video and audio arena can solve this and then AMD will beat Intel Hands down!!

[xboxrulz1405241485 0]

no, AMD is BUYING ATI. That's very certain, 'cuz after the acquisition, ATI and AMD will be renamed to AMD.It may not be that good for the end-users. For me, I'm highly concern with our Canadian identity and our economy more than what good it'll do for end-users. After the acquisition, it'll hit hard on our economy.xboxrulz

Edited August 7, 2006 by xboxrulz (see edit history)