Digg this Story
I am busting at the seams here, I have been holding my opinions on this potential ATi + AMD deal for many months now. Obviously everyone knows Intel’s latest product offering is excellent and news on Conroe/Woodcrest is humming along – but this deal with ATi + AMD has positive cataclysmic effects on the entire industry. This deal slightly overshadows any news going on in our industry at the moment.
I am going out on a limb – I, like many others, believe this deal is imminent and I am offering up my reasons why I believe this deal makes sense.
As many of you know I have always said that ATi is a target for acquisition, and I truly believe they are a diamond hidden deep in the rough – and with a little bit of polishing this acquisition will go down in history as the best move that AMD ever made. ATi + AMD = a go big strategy that will shake the very foundation of our industry.
Based on the feedback I’ve received from many analysts, I am going to assume that most people will not be able to make sense of this deal. The following obvious questions come to mind;
1) Why would AMD buy ATi, why not Nvidia? Isn’t Nvidia a stronger company?
The answer this question requires some methodical strategic thought. This is not unlike a chess game – and I believe that AMD is positioning its pieces carefully before it works its way over to the king.
- ATi is generally undervalued. They have been trading in a tight little window for what seems like forever. ATi does not have the market prowess that Nvidia has; quite simply Nvidia knows how to manage their relationships with Wall Street better than ATi does.
- ATi is very much like AMD was 5+ years ago before the new AMD management came on board and started to fix the company. Under Hector Ruiz, new management leveraged the awesome innovations that AMD had under the hood and turned the company on its head. For the last 3+ years AMD has been the undisputed leader in almost all areas of the market.
- ATi has some killer technologies under their hood – not least of which are publicly available now. ATi is the best third party notebook chipset manufacturer in the world. They understand power management like no ones business, and they have the capabilities to build killer platforms for mobile platforms. There is no denying that the Intel Israeli team is talented when it comes to designing some killer platforms - especially for notebook. ATi + AMD under one roof = mobility platforms that will rival anything that anyone else can put out.
- ATi’s handheld business is strong and AMD has some great OEM relationships to help raise this portfolio.
- No need to talk about the benefits of XBOX 360 + Nintendo Wii, I think you all know what this translates to.
- ATi’s decentralized organization could use a big tune up. They are very easy to work with, and they are incredibly flexible – this acquisition will come as a welcome challenge to their team.
- ATi has polished their skills in platform chipsets, and with a little bit of honing they could be the next big force in the market. With AMD building their own platforms “in house” via ATi I think we’ll see some pretty amazing pre-engineered products.
- It’s not the time for Nvidia yet: If anyone knows Nvidia they know that their CEO is very much in control of the organization. Nvidia is also much more expensive than ATi, and rightfully so – Nvidia has been making all the right moves for many consecutive months. Nvidia is known for their aggressive business moves, and those who know Jen-Hsun will tell you that he wouldn’t let anyone buy the company without him remaining at the helm of the larger organization. Think about the future opportunities here –- We could see the beginnings of a much larger organization.
2) Why is AMD fixated on the graphics market?
Long term thinkers already know that CPU and GPU computations may eventually end up on one piece of silicon. Back in the days of the separate math co-processors industry “pundits” didn’t believe they would ever morph into one – but those in the know realized that this bottleneck needed to be cut out as soon as possible. In the case of CPU + GPU the possibilities are endless – imagine a multi-core piece of silicon where one core handles massive CPU computations while another handles graphics, and perhaps another handles the traffic between the multiple cores.
3) Will Nvidia react negatively and work exclusively with Intel?
Hardly. There is no way that AMD will alienate Nvidia. In fact I am quite confident that Nvidia will actually work closer with AMD, and perhaps share and co-develop graphics in the long run. There are no ego’s at AMD or ATi – if they feel it’s good for their shareholders and their customers to work closer with Nvidia they will do it. AMD knows part of the reason for their success is the fact that they offer choices to their customers. Also, the worldwide demand for chipsets is higher than what ATi could produce so obviously Nvidia will still play a major role in AMD based machines.
AMD has some great platform solutions slated for next year, including server, workstation, notebook, etc. I can’t get into too many details, but in my mind AMD + ATi = one large company with the potential of becoming a massive juggernaught. Any debt that AMD incurs to make this transaction a reality will be short lived. The long term outlook on AMD is unbelievable if this deal is approved – this company will go big, and those along for the ride are going to reap huge rewards.
As usual, initial reactions to change are always negative - but long term thinkers who truly understand the technology will tell you this deal is the one way that AMD can turn the tides in their favor.
On another note, someone needs to write a book on AMD, I’m telling you it would be a best seller. The management over at AMD really understands the future of technology and the needs of their customers. I think a book about how they did it would be a very interesting read.
I welcome any and all of you to visit my blog at www.rahulsood.com for more details on this transaction as it progresses – and I welcome all comments on all sides of the deal.
The follow up to this article (with response to comments) is here, please check it and reserve your comments for that entry.