AMD-ATI Merger Looks Likely

[Brian]

AMD-ATI Merger Looks Likely (http://www.thetechlounge.com/news/10167/AMDATI+Merger+Looks+Likely/)

"Advanced Micro Devices may be looking to buy graphics company ATI Technologies, a move that would benefit the overall graphics industry, according to RBC Capital Markets. "The synergies of this seem consistent with the recent announcements by AMD to significantly increase capacity over the next few-years," wrote analyst Apjit Walia in a note to investors Wednesday. "We believe ATI is a rare-buy in the semiconductor space right now given the near-term tie-up dynamics."

Walia based his prediction on recent checks in the PC food chain. RBC has an "outperform" rating and $23 price target on ATI, and no rating on AMD. The firm expects ATI to report fiscal 2007 earnings per share of $1.06. It has long been discussed that the graphics-companies are likely to be bought by one of the microprocessor companies, according to Walia. However, for AMD-rival Intel (nasdaq: INTC - news - people ), a partnership with a graphics company may not be the best idea. "This tie-up might make sense for AMD at this juncture but we don't think Intel should pursue tying-up with graphics companies and should instead look at the communications-space," said the analyst."

Read full story here (http://www.forbes.com/markets/economy/2006/05/31/amd-ati-technologies-0531markets10.html)

[Kurtis]

I'm not sure just how likely this really is, since it's just analyst speculation, but a lot of people have strong opinions on this subject.

I can see how such a merger might help AMD, based on the fact that PC sales are decreasing (as the article mentions) and AMD wants to be in some other growing markets (like ATI's chipsets in cellphones, TVs, etc...). So from that standpoint, it might help AMD. But I don't get how acquiring ATI would help them with capacity issues.

What do you think?

[CTM420]

Sounds like a good thing to me.

It's true though that ATI doesn't have any fabrication capacity themselves. Maybe they don't mean fabrication capacity, but engineering capacity.

[earthborn]

I disagree that this would benefit the graphics industry.

Right now, ATI and Nvidia are about even. No matter who you like or don't like, you have the OTHER company to thank for any great prices you get. It is the competitive drive and competition between the companies that constantly drives the prices of video cards down.

Nvidia right now, relies on AMD for open-information. AMD supplies Nvidia information that it uses for making its motherboard chipsets compatible with AMD processors. If AMD gets into cahoots with ATI, then that could very well undermine Nvidia and may remove a large segment of competition from the marketplace. Imagine a marketplace where ONLY ATI exists, and a low-level graphic card costs you $1000, while the high-end graphic cards run $3000. ...........see my point?

[Kalo]

Not sure this would benefit the consumers at all, and would hurt the business of Intel quite a bit. Hope it doesn't happen, even if I love the move in the eyes of business.