GeekTech: AMD Buys ATI: Should You Care?

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Corporate mergers typically are not fodder for this column, since few actually lead to stuff that matters to PC enthusiasts. Go ahead, try to name one good product-related thing that emerged from HP's acquisition of Compaq--it can't be done. However, when AMD finally announced its long-rumored plans to buy ATI, well, that qualified as GeekTech news.

That's because do-it-yourselfers have long had a soft spot for both companies. AMD has always been the scrappy processor underdog fighting the good fight against the corporate behemoth Intel. (Mind you, AMD is a billion-dollar-earning underdog that has owned the high-performance desktop CPU crown for several years.)

Meanwhile, ATI was that Canadian graphics company that garnered notable affection from enthusiasts back in 2002 when it surprised everyone--including its brash competitor nVidia--with a fantastic little GPU called the Radeon 9700. That chip helped set off a back-and-forth battle for graphics supremacy that continues today--much to the delight of performance nuts.

So why are these two companies tying the knot? Will the merger impact AMD's longstanding and fruitful relationship with nVidia, which makes the chip sets enthusiasts love to use with AMD processors? What kind of processor and graphics innovations can we expect from the new company? And what do we call it?


Here's what we know for sure: The deal will close in about 90 days (roughly late October). The merged company will be called AMD (or at least the AMD folks say it will; the ATI folks say the name isn't official yet). And frankly, that's about it.

Everything else is just guesswork, for now. Executives say it's not clear which product lines and brands will remain, though I can't imagine the new company would do anything to drastically retool either its desktop CPU or GPU brands.

One thing that is clear when you talk to AMD and ATI executives about the merger: It's not really about making a faster desktop processor, or GPU. At least not right away.


Fact is, AMD is already very competitive with Intel on the consumer desktop (Conroe benchmarks notwithstanding). No, AMD is betting $5.4 billion dollars on ATI because it thinks that, together, the companies are better equipped to take on Intel in areas such as mobile computing, commercial desktops, and emerging markets (where integration and low prices are most important).

With AMD's processors and ATI's graphics and chip-set products, the new company will be able to offer manufacturers a more complete menu--the same way Intel currently does.

However, AMD spokesperson Jon Carvill is quick to point out that AMD has no intention of closing off such a future platform to outside companies. "We're not going to close our architecture," he says. "The open approach that AMD has always offered will remain."

As a result, Carvill is confident that AMD and nVidia will continue to work together well, even as nVidia's fiercest competitor sets up shop under the same roof.

"nVidia has been a great partner to AMD for many years," he says. "If the best solution is nVidia at some price point, then we want vendors to be able to make that choice." (Over at nVidia, CEO Jen-Hsun Huang had his own spin on the merger, according to this BusinessWeek story: "I thought it was just impossible to get a gift like this," he said. "ATI is basically throwing in the towel, leaving us as the only stand-alone [graphics chip] company in the world."

Platform Evolution

ATI supporters shouldn't worry that the graphics side of the business will play second fiddle to CPUs, says Chris Evenden, ATI's director of public relations. "ATI fans should be excited--our objective is to be the number one graphics company, and now we're going to have some distinct advantages."

One of those advantages will be the ability to work closely with AMD's CPU engineers to create more cross-platform ideas, he says. "Together we can innovate on the PC architecture. There haven't been big innovations in a long time--the block diagram hasn't changed in PCs for years. We could change that."

For example, Evenden says, future AMD chips could have video controllers built right into the CPU. Another option could be a CPU and GPU on a single chip. Bringing the two companies' engineering teams together could lead to evolutionary, or revolutionary, changes in the PC platform, he says.

"Maybe there are different ways of getting multiple CPU cores or graphics cores into one machine," Evenden says. "Once you have the whole platform, you can go different places."

Nothing New Soon

Nobody should expect new products from the merged company right away, says Dean McCarron, principal analyst, Mercury Research.

"It takes 18 months to three years to develop new semiconductor products," he says. "Once they get the go-ahead [on the deal], they'd start on new product design, but we wouldn't see that until the second half of 2008."

In the meantime, both AMD and ATI will need to keep their existing customers happy. AMD's Carver says the company is very conscious of its status with PC enthusiasts. While this deal may not garner immediate benefits for those folks, he's confident they'll stick by the company, and reap the benefits in time.

"I think with the enthusiasts if you demonstrate the ability to support them and give them what they want, they'll stick with you. They want their feedback to be taken seriously, and you can't become complacent. I think from our perspective that the enthusiasts remain front and center for us."

Tom Mainelli plans to make an educated guess on the wisdom of this merger in 18 months to three years. Look for his follow-up column in 2008. In the meantime, drop him a line at
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