Then there were three.
It could be argued that the two biggest rivalries in the IT industry were AMD verses Intel and ATI verses nVidia. Not anymore. Today the US CPU giant today officially announced its purchase of the Canadian graphics guru ATI in a deal worth a massive $5.4bn.
In the short term the move will enable AMD to compete directly with Intel’s Centrino platform and use its financial muscle to bully nVidia. From 2008 however the new monolith talks up an aim “to move beyond current technological configurations to transform processing technologies, with silicon-specific platforms that integrate microprocessors and graphics processors to address the growing need for general-purpose, media-centric, data-centric and graphic-centric performance.” Mobile devices look out…
Naturally, big fish on either sides were understandably elated. AMD Chairman and CEO Hector Ruiz chirped up: “Bringing these two great companies together will allow us to transcend what we have accomplished as individual businesses and reinvent our industry as the technology leader and partner of choice. We believe AMD and ATI will drive growth and innovation for the entire industry, enabling our partners to create differentiated solutions and empowering our customers to choose what is best for them."
Dave Orton, President and CEO of ATI also chipped in. "Joining with AMD will enable us to innovate aggressively on the PC platform, and continue to invest significantly in our consumer business to stay in front of our markets," he said. Orton will come to AMD as the exec VP of the ATI business division and report directly to Ruiz and AMD COO Dirk Meyer.
Even Microsoft jumped onboard with Jim Allchin, Co-President of the company’s Platforms & Services Division self promoting, “Windows Vista will deliver incredible advances in the user experience as a result of advancements in graphics integration and performance. 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.”
Under the terms of the transaction, AMD will acquire all of the outstanding common shares of ATI for a combination of $4.2 billion in cash and 57 million shares of AMD common stock, based on the number of shares of ATI common stock outstanding on July 21, 2006. All outstanding options and RSUs of ATI will be assumed. Based upon the closing price of AMD common stock on July 21, 2006 of $18.26 a share, the consideration for each outstanding share of ATI common stock would be $20.47, comprised of $16.40 of cash and 0.2229 shares of AMD common stock.
The combined company would have achieved approximately $7.3 billion in total consolidated sales during the last four quarters with a workforce of approximately 15,000 employees AMD revealed in a statement. The new company will maintain sales, design and manufacturing centres worldwide and major business centres in Silicon Valley, Austin, Texas and Markham, Ontario - all key centres for the combined company.
In the fine print ATI will pay AMD a termination fee of $162 million should the deal collapse though both expect the transaction to be completed in the fourth quarter of 2006.
As with any major merger there is always a human cost and AMD the deal will reduce ‘operating expenses’ by approximately $75 million for the combined company by the end of 2007. At present it is unclear where the axe will swing.
So now we play the waiting game. Expect to hear little expansion on these broad battle plans before official completion but then strap yourselves in. 2007 is going to be a big year in the chipset market…