ATI and AMD Seek Approval for Merger?

Krugerlive writes "The rumor of an ATI/AMD merger/buyout has been out now for sometime. However, this morning an Inquirer article has said that a merger deal has been struck and that the two companies will seek shareholder approval on Monday of next week. In the market, AMD is down as a result of lackluster earnings announced last evening, and ATI is up about 4% on unusually high volume." This is nothing but a rumour at the moment, a point that C|Net makes in examining the issue. From the article: "AMD has always boasted that it only wants to make processors, leaving networking and chipsets to others. AMD does produce some chipsets, but mostly just to get the market started. Neutrality has helped the company garner strong allies."

Comments

Does that mean....

[mikael]

NVidia would seek a partnership with Intel (Although some news articles reported that they felt that Intel
were holding back progress in 3D graphics performance).

Talk about a dumb move

[overshoot]

Well, as an AMD stockholder I'll certainly vote against it (not that I have enough shares to matter.)

The market's view of this is visible from the fact that ATI is up and AMD is waaaay down.

Dilbert, anyone?

[ivoras]

Doesn't this story look like a Dilbert-ish situation - the companies themself don't even consider merging but because "the word is out" and "everybody knows they'll do it" it somehow becomes a reality?

Not that far fetched.

[WoTG]

At first glance, this is a stupid idea for AMD, but upon reflection, it isn't that bad. We've got to look at the 5 year picture for a deal of this size. What will AMD need to do to be more successful in 5 years than they are today? Well, despite what the teenage gamers will say, it actually doesn't mean having the highest FPS in Quake 5. The stable, highest volume, and generally profitable sales are in corporate servers and workstations. That's Dell, HP, and to a lesser extent Gateway, Lenovo, et al. So, what do they need from AMD or Intel? They want cheap, fast, reliable supply, few defects, and ease of integrating into the individual computers. After several years of the Athlon and Opteron, AMD is only now starting to get a toe hold in workstations and a reasonable share of server CPUs.

IMHO, AMD would be well advised to start shipping it's own chipsets, just like Intel. It just makes things easier for their most important customers, the big OEMs. They have one less vendor to worry about. There's less testing required, since presumably AMD would test the CPU and chipset together. And it's less risky for both customers and AMD since AMD has a very strong incentive to make sure that chipsets will be available for their platform on time, whereas third parties have different priorities.

Then there's the whole GPU angle. Why shouldn't GPUs be produced in company owned, i.e. tweaked for performance, fabs? They're every bit as complex and big and expensive as CPUs. Bringing that in house should give a nice bump to performance. And what is a GPU going to be in five years anyway? On the AMD platform, all the tools are in place to allow the GPU to work much more like a cheap DSP/co-processor than we've ever seen before. If the Opteron wasn't an Itanium killer, maybe a couple Opterons and a couple "GPU-DSPs" will do the trick. Even for regular workstations, imagine just plugging a GPU into a free socket on the MB? That would fit very nicely in the middle of the graphics market... way better than integrated, but way cheaper than an add-on card.

Lastly, AMD needs a way to use the last generation fab equipment a little longer. Making chipsets would let them use the fab equipment for an extra few years. They lost that cost efficiency when they spun off the flash business. Fab gear is expensive, so it's kind of a waste for them to be yanking it out everytime the minimum for a marketable CPU moves higher.

Five years ago AMD needed partners and an ecosystem to support their own platform and survive as a company. The next five years are about turning the CPU market into a duopoly.

I have a few shares of AMD. And I'd like to see this deal happen, but only at a decent price (from AMD's point of view). Hmm... this post turned rather long...

100% Going To Happen

[mpapet]

Stock trading volume on ATI spiked today and price went up. Volume tells you traders are looking to make some quick cash on the spread between today and the announced merger price. Increase in ATI price says people buying stock think it's a good deal for ATI.