Will AMD Buy ATI?

By Jessica Davis -- Electronic News, 5/31/2006

Fueling speculation that AMD may be in the market to acquire graphics co-processor maker ATI, analyst firm RBC Capital Markets has reported that “recent checks in the PC-food chain suggest a tie-up between AMD and ATI.”

But such a tie up does not necessarily indicate a merger, according to the report’s author, Apjit Walia.  Walia said indications are for a major strategic tie up -- but that could mean anything from an alliance to a joint venture to a merger. 

“They are building up capacity,” said Walia. “Doing this shouldn’t be a surprise.”

In his report, Walia noted that the synergies of such a deal would be consistent with recent AMD announcements about the company’s plans to significantly increase capacity over the next few years.

Such a deal would also make sense on the technology side.  AMD Senior Fellow Chuck Moore recently told Electronic News that the company is looking at streamlined processors for performing specific functions – first outside of its general purpose processors, and then perhaps bringing such co-processors on-chip in coming years.

In the short term such a deal would shake up the relationships between graphics co-processor makers, ATI and Nvidia, and x86 processor makers, Intel and AMD.  If AMD teams exclusively with ATI, Intel and Nvidia will most likely end up in an exclusive partnership with each other when the dust settles.  And that scenario would be bad for Intel and Nvidia in the short term, according to Walia.

An AMD spokeswoman said the company does not comment on rumors or speculation.