When Titans Join Forces: Implications of the AMD-ATI Merger

The Lead Up to the Merger

Just half a year back, the notion of AMD buying over ATI was simply nothing more than part of the IT rumor mill and many never saw the possibility. After all, both corporations have a completely different focus group and never had an overlap in lineup. By Computex 2006, the rumors escalated, but yet there were no hints from either party. Then on 24th July 2006, AMD and ATI globally announced plans to unite in a transaction valued at approximately US$5.4 billion.

Many of you would have heard about this industry-shaking merger that has numerous implications not only for the entire IT industry, but for the consumers as well. Hardware Zone managed to catch up with Bryan Low, the Vice President for Sales and Marketing in South Asia at AMD to answer our queries of the merger, the current status of operations for both companies and upcoming plans. Bryan is responsible for developing and overseeing the marketing and sales strategies and activities for AMD in ASEAN, Australia and New Zealand.

HWZ: The AMD-ATI merger deal was a huge move and a real shaker in the IT industry. How did such an industry changing deal come about so subtly that it was dismissed as nothing but a rumor for several months?

Bryan Low: As you know, company acquisition discussions take a while to negotiate and such discussions are highly confidential to protect business interests. There would be no point making any announcements until it was confirmed. Otherwise it would have been pure conjecture.

HWZ: What are the forces that lead to the AMD-ATI merger? Would you be able to chronicle the events that led to this deal?

Low: This transaction is born of a mutual recognition that by combining our efforts, we can be a leading processing powerhouse. And fundamentally, this is about growth, innovation and choice. We believe the marriage of AMD's and ATI's best-in-class computing, graphics, digital media and processing technologies will result in more innovative and more complete customer-focused solutions.

AMD and ATI complement each other's strengths across technologies, markets, manufacturing and geographies. Our collective roster of strong customer relationships represents a who's who in the computing and consumer electronics industries.

We believe our common heritage of competition, innovation and customer focus will empower us to innovate beyond existing boundaries and deliver more integrated, open standards-based solutions and create customer-centric platforms and solutions. We will create technology centers of excellence worldwide. This is a transaction of growth - for our employees, our customers, our partners, and the industry.

We started discussions some months back and just finalized the details a month ago. We are presently going through the approval process with the relevant authorities and hope to complete the acquisition by the end of the year.

New Focus Areas and Dispelling Myths

HWZ: What are the key reasons for this merger besides capitalizing the synergy of both companies? What does each company see in each other that is vital to move them forward and what is AMD's short-term and long-term gain from this acquisition?

Low: We believe this acquisition will enable us to deliver to end users outstanding total platform solutions: better time-to-market; unified support for our customers in hardware and software; and more optimized technology for example in graphics for digital television, battery life for mobile. Theses are things that customers are looking for.

It is too early in the process to provide any details. However, I can say that in 2007, we plan to deliver new, open platforms for commercial client, mobile computing, gaming and media computing and emerging geographic markets. Then we aim to transform processing technologies with general purpose, media-centric, data-centric and graphic centric platforms in 2008 and beyond.

HWZ: Has the thought of such a merger ever occurred to AMD in the past? Why now?

Low: As mentioned earlier, company acquisition discussions take a while to negotiate, we just happened to complete our discussion at this time. AMD is always looking for opportunities to deliver solutions that meet our customers� needs.

HWZ: Why the decision to go with ATI? Was NVIDIA, VIA and SiS ever considered?

Low: ATI is the perfect fit. We are strongly culturally aligned - our companies share a common commitment to customers, innovation and competition. Both companies have a strong foundation with leading employees and a team-oriented focus. Our strengths and technologies also complement each other. While AMD has a strong reputation and has made significant gains in the consumer desktop space, ATI's leadership in the notebook segment - from graphics to chipsets as well as geographically - offer strong growth opportunities for the combined company. ATI also has a fast-growing, high-margin consumer electronics business that NVIDIA does not.

HWZ: According to certain news reports, it is said that the ATI brand name would cease to exist after the merger has completed and would bear the AMD name - how true is it? If so, what about product names from ATI currently? Would they still remain intact?

Low: It is too early in the process to provide too many details, however the name of the company will be AMD. The future branding of individual products and platforms will be determined at a later point in time.

HWZ: Some analysts expressed opinions that AMD might sell off ATI's consumer electronics IC (Xilleon, Theatre and Imageon products) division that currently caters to the Digital TV and Handheld segments to other industry players in that field already. We have our reservations on that, but how does AMD plan to leverage the CE segment gained from ATI?

Low: The PC and consumer electronics continue to converge. The CE segment gain will enable us to deliver to end users outstanding total platform solutions: more optimized technology (e.g. graphics for digital television, battery life for mobile). With this acquisition, we plan to succeed in both markets.

HWZ: On the chipset front, consumers are wary about Intel's 975X chipset continuing to offer ATI CrossFire support since the AMD-ATI merger process began. Will that technology still be supported on this and other chipsets?

Low: AMD has always believed in being customer centric. Our customers can use the chipset that is designed to best meet their technology and business needs. Our customers will continue to dictate our offerings.

** Updated on 25th September 2006 **

Editor's Note: With regards to the CrossFire support on Intel chipsets, latest news seems to have that ATI and Intel are validating CrossFire even on the Intel P965 Express chipsets. A few days earlier, MSI had announced that their high-end MSI P965 Platinum motherboard to be the first P965 Express class board to officially support ATI's CrossFire dual-graphics card technology, while the hot of the Internet, we pick news that ASUS' P5B Deluxe is soon going to have an official BIOS update to support ATI CrossFire as well. Due to the way this chipset functions, the Intel P965 Northbridge's PCIe Graphics (PEG) interface will still operate at 16x transfer rates while the secondary PEG interface will be via the Southbridge functioning at 4x transfer rates and communicates via the Digital Media Interface (DMI) that exists between the chipsets.

Future Plans and Possibilities

HWZ: AMD has been talking about an upcoming open architecture system codenamed Torrenza for sometime. Could you help elaborate to our readers what does AMD hope to achieve with this platform and how does it fit the new company merger now that ATI is part of AMD? How would it play out for other system component providers? How keen would they be to support this initiative or what would AMD do to entice them?

Low: Torrenza is a multiphase plan that will begin with AMD to encourage its partners to utilize its HyperTransport slot (HTX) to develop add-on cards or 'accelerators' for specialized use such as games, media encoding and decoding and scientific work. When these accelerators achieve broader appeal, AMD will help partners plug the accelerators into their motherboard via a socket that gives it direct access to the CPU. And the natural step after that is to package the accelerator with the chip, and ultimately into the die itself.

This fits into the acquisition as more companies can now play a part in 'designing' the processors with their accelerators. Torrenza is the realization of AMD's long-term plan to create an open and extensible microarchitecture for its chip.

Through our feedback from our system component providers and our philosophy of open standards and open ecosystem, we believe they will be keen to support this initiative.

HWZ: Would AMD's merger with ATI affect the current ties with existing platform providers? E.g. NVIDIA, VIA, SiS and others?

Low: Our goal is to deliver the right solution for each of our customers. We will continue to work closely with NIVIDA, VIA, SiS and other partners.

We believe that our collaboration with customers and industry partners, including some who offer competing products to our offerings, will continue as part of our effort to champion choice in global markets and to deliver preeminent solutions and products for computing and consumer electronics to our customer across all product markets.

HWZ: With the AMD-ATI merger, AMD has also mentioned of tighter integrated platforms and the possibility of a CPU and GPU to coexist on the same die or packaging. With multi-core processors on the horizon, we can certainly see the possibility opening up, but how feasible is this and how would AMD plan and execute such a paradigm shift?

Low: This is feasible through AMD's take in a modular approach to designing its upcoming processors. We are taking a "Lego design" approach where features are compartmentalized so that they can be mixed and matched. Features such as memory controller, I/O interfaces, clocks, HyperTransport and caches are now independent blocks that can accompany or be removed from the processors.

This technology will place an importance in making Torrenza work, as this will allow integration and removal of third party accelerators from its processors without making any major changes to the chip. AMD has already developed a seamless means of making the components communicate with each other.

HWZ: How would this affect ATI's graphics plans in the future?

Low: This acquisition allows ATI's graphics plans to be fully integrated into the processors in the future, offering more variants for commercial client, mobile computing, gaming and media computing.

HWZ: At the moment, we understand that all production arrangements would be as they are for both AMD and ATI. Would ATI be utilizing any of AMD's fab facilities in the near future?

Low: We do not rule out any possibility of that, but at this moment, we are not doing so.

HWZ: Where do you see AMD to be in the next 5 years?

Low: The next few years will be exciting for AMD. We will be recognized as the industry leader in providing customer-centric solutions. Based on our current success and the technologies that we plan to introduce, you'll hear more exciting announcements from us. Stay tuned!

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