AMD+ATI: A Match Made in Heaven?

Monday, Jul. 24 2006 | Author: J. Angelo Racoma

amd+ati.jpg It has been rumored that no. 2 chipmaker AMD has plans to acquire graphics chipmaker ATI. It seems they’re about to make a formal announcement today. From Reuters:

AMD, the No. 2 supplier of computer processors, plans to acquire ATI to help it gain market share against larger rival Intel Corp. (INTC.O: Quote, Profile, Research), a source familiar with the situation previously told Reuters.

AMD Chairman and Chief Executive Hector Ruiz and Chief Financial Officer Bob Rivet would hold a conference call with investors on Monday. The company declined to elaborate.

While financial pundits have doubts as to the strategic value of such an acquisition, I would say AMD is bound to do something about the fact that Intel has begun to produce chips that are overtaking AMD’s own in terms of raw processing power. This has been the edge AMD has held over its arch-rival for some time now, but with Intel’s release of its latest Core 2 processors, AMD has lost pole position in the performance game. And it seems AMD has, indeed, slashed prices in reaction to this. From TGDaily:

As expected, AMD rings in the next round of the processor price battle with Intel. In an effort to remain competitive, the company today slashed the prices of all desktop processors. In the strategically important field of socket AM2 CPUs, the drop averaged 47% – which may not be enough to retain overall price/performance leadership, according to TG Daily findings.

So whether the planned acquisition is a markeing move (a knee-jerk reaction?) or intended for long-term development, we have yet to see. Perhaps it’s the game enthusiasts and the high-end computing market that stand to gain the most.