AMD planning ATI bid, sources say

[ShaneSparky_YYZ]

Chip maker Advanced Micro Devices Inc. is considering a $5.6-billion (U.S.) takeover bid for ATI Technologies Inc., a leading manufacturer of computer graphics chips, sources say.

ATI stock is rising today on rumours that AMD will make a friendly offer of between $21 and $23 as early as next week.

The board of directors at Sunnyvale, California-based AMD have approved a takeover offer, according to an investment banker familiar with the talks. Other sources in the financial industry said AMD executives have been spotted at ATI's Markham, Ont. head office.

ATI shares are changing hands at $16.12 on the Nasdaq exchange, up 39 cents from yesterday's close, with twice the trading volume typically seen in the stock. At these prices, ATI sports a $4.1-billion market capitalization.

?There has been considerable industry speculation that AMD may pursue an acquisition of ATI Technologies, although such an outcome is by no means certain,? said a report this week for analyst Eric Gomberg at investment bank Thomas Weisel Partners ?In light of AMD's technology road map, and specifically its Torrenza technology, we believe that such a merger would not be so far fetched.?

AMD would make an offer at a 20-to-40-per-cent premium to ATI's current share price, Mr. Gomberg estimated. ATI and arch-rival Nvidia Corp. dominate the market for the chips that run computer games. AMD and its major competitor, Intel, both buy ATI products.

Other industry watchers were less convinced an offer was coming, or that such a union made sense for AMD. One analyst described such a deal as ?a breathtakingly bad idea from a strategic perspective.?

AMD has ?whipped Intel from one end of the school yard to the other? over the last three years and done so without a graphics business of its own. Acquiring a graphics capability would be an expensive distraction and would offer AMD almost no advantage, the analyst said.

ATI has maintained closer ties to Intel over the years than AMD, and that relationship would be troubling for ATI to dismantle.

The closeness of the two means ATI gets an early look at some of the standards and technology that Intel, the world's biggest chip maker, is working on. If AMD acquired ATI, ?expect Intel to send ATI to the back of the bus,? the analyst said.

In addition, Intel has left a lot of the lower-margin business of chipsets to ATI as Intel wrestles with capacity constraints. As a result, integrated chipsets account for about 25 per cent of ATI's revenue today, up from just 10 per cent a year ago.

Intel would likely move to ?repatriate? that business if AMD acquired ATI.

Another messy factor to consider is that Intel and ATI have cross-licensed some of their intellectual property, raising the possibility that some of ATI's technology would end up in a competitor's hand after a deal.

?Stupidity is no barrier to tech mergers,? the analyst said. ?This deal would be out of strategy for AMD and out of focus.?

Other people watching the chip sector wonder if AMD is being forced into making an acquisition because it fears Intel may use graphics to lock it out of markets in the future.

?If AMD has got a whiff of something that Intel is doing far enough out and now realizes it needs graphics IP to compete, then a deal makes sense,? a second analyst said.

Source: CTV

[jerry]

Its almost done. Add another source that confirms this.

[Tech Star]

I want AMD to buy Ati...then Intel buys nVida! :)

[Hurmoth]

Now I'm more apt to believe this. The story dies for a little while and then comes back, seems exactly like the way a lot of major buyouts happen. Look at Dell/Alienware, that came and went for a couple of weeks, then goes away for a while and comes back and boom Dell buys Alienware. Plus, CNN is reporting it, and as much as I hate CNN, they are fairly reputable, so it is very believable.

But then again, CNN is reporting AMD's name as "Applied Micro Devices" :laugh:

[Angel Blue01]

I think this would be a terrible thing for AMD, CPU manufucters should stay out of the graphics market (Maybe AMD should buy a portion of ATI and use it to make integrated graphics like Intel does on their motherboards.)

[Doli]

I just hope this doesnt cut down my options when getting a new PC, but i dont think ATI would cut out Intel on the Crossfire chipsets... I hope.

[Hurmoth]

I think this would be a terrible thing for AMD, CPU manufucters should stay out of the graphics market (Maybe AMD should buy a portion of ATI and use it to make integrated graphics like Intel does on their motherboards.)

I cannot see this hurting AMD at all. AMD would have their own chipsets and could create IGPs and really pull market share away from Intel then. Shoot Dell only uses Intel chipsets, so what are they going to use when they switch to AMD? If AMD had their own, I think Dell might have been more receptive earlier. But that's just my opinion.

I just hope this doesnt cut down my options when getting a new PC, but i dont think ATI would cut out Intel on the Crossfire chipsets... I hope.

They couldn't, AMD would probably be sued for monopolistic business tactics. Exactly what AMD is suing Intel for. I cannot imagine they'd turn around and do the same thing. That would be like shooting yourself in the foot. But anything's possible...

[crackhbob]

According to xbox-scene, they said that AMD doesn't have the scratch to buy ATI out. Also, they seem to think that on Monday they're gonna ask the shareholders about merging, so I can't see how anyone thinks it's almost done if that's the truth.

[Hurmoth]

According to xbox-scene, they said that AMD doesn't have the scratch to buy ATI out. Also, they seem to think that on Monday they're gonna ask the shareholders about merging, so I can't see how anyone thinks it's almost done if that's the truth.

I'm going to trust CNN Money over "xbox-scene" :rolleyes: Without all due respect to them, CNN has been around a lot longer. So has Reuters and Forbes, who are now reporting the same thing. I can't imagine why AMD doesn't have $5.5 billion to buyout another company, that doesn't make sense that these new organizations would report $5.5 billion if AMD didn't actually have it.

[edit] Ah hell, did you see who their source is: http://www.theinquirer.net/default.aspx?article=33185 The most untrustworthy idiots on the internet. Did they just report recently that there was going to be no buyout, not even a merger?

[crackhbob]

I completely agree with you about trusting CNN over xbox-scene, but I don't understand why they'd say it if there wasn't any kind of truth to it. The news actually came from the inquirer, here's a link http://www.theinquirer.net/default.aspx?article=33185

Edit: I've seen news come from them before, I dont see how they're the most untrustworthy idiots around, but hey, you're a news guy and I'm not. I was just pointing the news out to add to the discussion.

Edited July 22, 2006 by crackhbob

[Tech Star]

Looks like this is not true! BTW how did the inquierer become so bad?

[DreadBoat89]

another canadian company about to be taken over by an american company...

judging by how the article says that ati has closer ties to intel, this might give em some problems

[Hurmoth]

Edit: I've seen news come from them before, I dont see how they're the most untrustworthy idiots around, but hey, you're a news guy and I'm not. I was just pointing the news out to add to the discussion.

I may have gone a little overboard in saying that, but I've never really trusted their news, but that's me personally.

[StartMeUp]

AMD Graphics! Yay! (Y)

[ShaneSparky_YYZ]

another canadian company about to be taken over by an american company...

judging by how the article says that ati has closer ties to intel, this might give em some problems

Exactly what i'm thinking, but Intel might jump in bed with Nvidia next, who knows, maybe they already have :o

[Long]

Intel's focus is low-cost and mass-market integrated graphics chip solutions.

AMD's focus is going to be high performance and gaming-market add-on graphics chip solutions.

I can see them operating side-by-side without much conflict.

[dagamer34]

Practically all AMD systems use ATi graphics anyway. This just means there's more cooperation between the two companies. (or one as it might become)

[viciv]

Intel+Nvidia >> AMD+ATI..

:(

[TokyoKiller]

ATi should slap AMD and tell them, NO SEX FOR YOU!!

[lil_psc]

nvidia is too big of a corporation for intel to take over completely, mabye a joint partnership

[jerry]

Edit: I've seen news come from them before, I dont see how they're the most untrustworthy idiots around, but hey, you're a news guy and I'm not. I was just pointing the news out to add to the discussion.

The source isnt Inquirer, granted they were the first one to report it. But coming out with a 4 sentence article hardly takes times especially the amateurish way Inquirer does it.

When such a big deal is being negotiated its likely that every news' source might come across such information. After all this deal has been months in the making, I'm not surprised.

[Fourjays Veteran]

I think this is a bad thing. Fanboyism aside, it could be very bad for competition. It will end up with AMD telling companies like Dell that they can only use ATI graphics cards on their boards.

Even if AMD does buy ATI, I doubt I will be effected. Intel + nVidia all the way. :D

[Pallab]

I wish it was Nvidia instead of ATI. It would have been just the perfect marriage.

[bob_c_b]

I cannot see this hurting AMD at all. AMD would have their own chipsets and could create IGPs and really pull market share away from Intel then. Shoot Dell only uses Intel chipsets, so what are they going to use when they switch to AMD? If AMD had their own, I think Dell might have been more receptive earlier. But that's just my opinion.

They couldn't, AMD would probably be sued for monopolistic business tactics. Exactly what AMD is suing Intel for. I cannot imagine they'd turn around and do the same thing. That would be like shooting yourself in the foot. But anything's possible...

There is no official word on Dell using AMD at the desktop level, my rabble from the Inq. And how would a company with 20% of the market ever be prosecuted for monopolstic practices? This is really bad for gaming and AMD in the long run, hopefully it's just another dumb rumor.

[Rob2687]

AMD Board Approves Acquisition of ATI, Bankers Confirm

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 reports said 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 Thornhill, 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.

http://www.dailytech.com/article.aspx?newsid=3453