The Platform

Acquiring ATI amounts to a quick (but expensive) way of filling in the gaps in AMD's current business.  AMD has already proved that it can compete technologically with Intel, and is currently working on fixing the problems with being able to compete in terms of manufacturing ability as well.  By acquiring ATI, AMD will have the talented workforce necessary to produce its own chipsets/motherboards with integrated graphics and engineer some very unique hybrid CPU/GPU platforms using Torrenza.

There are other ways AMD could have gone about attaining the same goal, for example by building its own workforce and IP rather than spending the $5.4 billion dollars necessary to acquire ATI's, but the acquisition approach is arguably quicker and allows AMD to focus on reaping the benefits sooner, not to mention that it leaves AMD better prepared for the future if GPUs do grow closer to the CPU. 

Intel has created the perfect example of how to be a successful microprocessor manufacturer, and its platform focus is one key element of that example.  The ATI acquisition, in many ways, is about following Intel's example and improving wherever AMD can. 

Can't We All Just Get Along?

The one element of this acquisition that you don't read about in press releases, is what it takes to actually make it happen.  It's not always easy to get a bunch of people from varying backgrounds and with various interests to work well together, it's even more difficult to take two well established and fully operational companies and expect to combine the workforces into one.  While direction for the combined company will come from both AMD and ATI senior management, making that translate into a well oiled machine that can not only innovate but execute great products is quite difficult. 

Having each company operate entirely independently makes no sense, since we've already discussed that it's what these two can do together that makes this acquisition so interesting.  AMD and ATI have to work as one company, but getting from where both companies are today to the point where they are one single harmonious entity (or at least as much as Intel) is going to be a very long and difficult process. 

One fundamental hurdle is that neither AMD nor ATI have particularly strong marketing, at least compared to their competitors.  Both Intel and NVIDIA have arguably done a much better job at marketing their products, building brands and gaining mind share.  We are concerned about the marketing direction that the new AMD would take, especially considering that in many ways ATI has the stronger PR/marketing focus.  At least from our dealings with the two companies, ATI gives more importance to its PR/marketing teams than AMD does, which is cause for concern since it is AMD buying ATI and not the other way around.  Only time will tell if AMD will assimilate ATI into its way of thinking, or if both companies will be able to use this acquisition as an opportunity to learn from one another.  We all know what the sensible choice would be, but getting thousands of people to agree on the same thing tends to complicate things. 

The one perspective that is easiest to support right now is Intel's "let's wait and see what happens" view.  Even with all this talk about the potential merger, the benefits, the pitfalls, etc. the reality is that right now all we have is a proposed merger.  It's certainly big news to even have such an acquisition out in the open, but until the final ink is dry many people remain skeptical.  It really wouldn't be too shocking to see the whole merger evaporate and for ATI and AMD to just continue on their present, independent paths -- certainly no more surprising than the initial announcement.

Our Thoughts: The GPU Side
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  • leexgx - Wednesday, August 2, 2006 - link

    i have only seen integrated graphics on nvidia based chip sets
    Most on board vdeio is VIA/s3 or sis integrated graphics (intel chip sets been intel video)
    Reply
  • Calin - Thursday, August 3, 2006 - link

    ATI RS480, RS482 and RS485 are in this game too (chipsets with integrated video). They were plagued by southbridge problems - slow USB performance mainly, and lack of features (like SATA 2). Whether or not this was detrimental to them, I don't know.
    (you can find mainboards with ATI integrated chipsets from MSI and ECS)
    Reply
  • JarredWalton - Wednesday, August 2, 2006 - link

    I agree with that. I think NVIDIA's comments are far more bravado than actual truth. However, if they can convince investors and consumers that they's "won the GPU war", it may not matter.

    My big problem with the deal: I don't know what AMD is doing spending $5.4 billon on ATI. Not that ATI is bad, but that's almost two new fabs. That's a lot of talented engineers making a lot of money for several years at least. I think ATI would be insane to not take the offer, but I feel AMD is almost equally insane to make the offer in the first place.
    Reply
  • Furen - Wednesday, August 2, 2006 - link

    AMD is borrowing the money to buy a viable, self-sufficient company. Convincing banks to let you borrow money for two fabs that will help you out 3+ years down the line is not very easy, especially considering that most people seem to think that AMD's growth is slowing down. Heck, having two extra fabs in 3 years could mean that AMD will just have lots of extra capacity with no use for it. Also, $5.4B for ATI is dirt cheap. Well, maybe not dirt cheap but undervalued considering that its portfolio rivals or surpasses nVidia's in many ways. Reply
  • AnandThenMan - Wednesday, August 2, 2006 - link

    quote:

    My big problem with the deal: I don't know what AMD is doing spending $5.4 billon on ATI. Not that ATI is bad, but that's almost two new fabs. That's a lot of talented engineers making a lot of money for several years at least. I think ATI would be insane to not take the offer, but I feel AMD is almost equally insane to make the offer in the first place.

    It is a big gamble for AMD, no doubt. A make-or-break deal in fact. But I would hope that the top brass has carefully considered the costs and the future markets/profits/advantages. With any high stakes game, the rewards are spectacular, but the cost of failing can mean you're history.

    I suppose having new fabs does you little good if you can't offer a platform to the Dell's and HP's out there. There is no doubt in my mind about one thing, AMD is aiming straight at Intel's integrated platform approach.
    Reply
  • Calin - Wednesday, August 2, 2006 - link

    AMD is trying to get in the game of long-term selling. The corporate computers initiative they had some years ago (or maybe a year ago) was a first step - "freeze" a computer configuration, which you can then offer for a long time (like 3 years). If a computer breaks, move its hard drive in a new computer in the same line, and have everything working with GUARANTEED no problems.
    AMD did good in taking over the enthusiast market by storm - but this market has NO loyality whatsoever - people will upgrade everything they need and everything they don't in order to get the next big thing. Having a guaranteed revenue of mostly guaranteed value beats that (having an non-guaranteed revenue of big or small value, like it happens now).
    AMD is much more ready to go in the corporate market - selling desktop computers, not just servers as it did until now.
    Also, take into account that if AMD is behind in the "next big thing" (whatever this might be), it really does not have the money to play catchup. Intel has both the money and the market inertia to continue to be a big player when everything else is against its products. So, AMD is puting its future on a bet that the next big thing will be core-integrated graphics. If this works, they would reap huge benefits - just like they were able to with the Athlon64 on desktops/Opteron on servers (and somewhat Turion on mobiles). Before the Opteron days, AMD was largely inexistant in server space (the Athlon MP started to make a buzz, but they had little market share).
    Will the money have been better spent on two fabs? AMD and ATI are both using external partners for creating chips, and this is more expensive only in the long run. In the short run, paying more for chips beats paying 3 billions to have your fab ready in three years. I figure the use of external fabs will continue long time in the future, and just the top of the line products will be built on AMD's fabs.
    Reply
  • darkdemyze - Wednesday, August 2, 2006 - link

    quote:

    Also, take into account that if AMD is behind in the "next big thing" (whatever this might be), it really does not have the money to play catchup.


    You say AMD doesn't have the money to play catch-up, and this is true that the whole deal is "a bet." But how else is AMD supposed to catch up? With C2D being released? Intel is going to have a huge impact on the performance sector by the end of the year - about the same time this merger is projected to be completed. What I mean by this is Intel is now ahead of the curve on AMD with this new architecture and according to their "new architecture every 2 years" roadmap, and Intel intends to not let the performance crown slip again as they did with Pentium4.

    So what is AMD to do to keep up? As you said, place a bet on "the next big thing" and hope for the best. I'm not discreditting AMD for K8L, or Torrenza for that matter. But I think at the very least Torrenza will be greatly effected by this endeavor. Personally I feel this is a very positive aquisition.
    Reply
  • Calin - Thursday, August 3, 2006 - link

    K8L is just a few months from launch, and it might get AMD to performance parity with Intel (or exceed Core 2 Duo, or be left behind). I am hoping for a draw or a win for AMD.
    What AMD needs is a cash cow (as Athlon64 was until now). Will the ATI acquisition bring this to table? It could very well be so, and there are enough niches and market slices where this strategy is a winner.
    Unfortunately, this might (or might not) reduce the competition in high-end video cards arena...
    Reply
  • Nelsieus - Wednesday, August 2, 2006 - link

    I strongly disagree with you.

    This, thus far, has been the best summarization coverage I've read on this issue.


    Reply
  • PeteRoy - Tuesday, August 1, 2006 - link

    AMD did not have it's own chipset with integrated graphics, audio and lan which is why it never made it to the offices where the big money is. Reply

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