On 21 Jul 2006 21:37:58 -0700, "AirRaid Mach 2.5"
<(E-Mail Removed)> wrote:
>CNN Money:
>
>http://www.tinyurl.com/outhh
>
>AMD seen close to $5.5 billion chip deal
<snip>
As one analyst put it, "Breathtakingly stupid". I have *NO IDEA* why
EITHER company would be considering this, it's a definite lose-lose
situation for both of them. The one company that REALLY stands to
benefit from this deal is nVidia.
By joining up with AMD, ATI is likely to lose all their deals with
Intel for chipsets. That includes not only motherboard chipsets but
also their deal to make Crossfire work on Intel boards. This would
probably cut ATI's revenue by about 20% in the next year or so. It
might also seriously hamper ATI's ability to make their video chipsets
work well with Intel's motherboard chipsets making their long-term
prospects seem even more bleak.
For AMD it would probably seriously hamper their relationship with
nVidia, one of their top partners. It is a HUGE investment in a VERY
tricky market. Given the above it's likely to buy AMD a company with
rising costs and sinking revenues. It will also burn up pretty much
all their cash flow, which hasn't exactly been their strong point.
For all that, AMD will get reduced focus, duplication of workforce,
complicated licensing deals that will cost many millions in lawyers
fees to sort out and two company cultures that might not mix very well
(just ask HP and Compaq about mixing company cultures.. this is a
major reason why that merger was a miserable failure).
The biggest potential benefit for AMD is that it gives them a
reasonably good motherboard chipset development team. However this
bonus is watered down somewhat by the fact that the deal might ****
off nVidia who currently make some of the best chipsets for AMD
processors. The benefit for ATI is that it will give them in-house
fab capabilities for their video and motherboard chipsets (if AMD
decides to use their upcoming capacity for this), which might give
them a competitive advantage over nVidia for video chipsets. Again
though this might be offset by being considered a second-class video
chip manufacturer by Intel, giving nVidia a competitive advantage
there.
As mentioned above, the only company that really stands to benefit
from this deal is nVidia. AMD will want to keep nVidia happy and
making motherboard and video chipsets for their processors, at least
for the short term. Intel will want to make nVidia doubly-happy and
probably cut-out Crossfire and start supporting SLI instead.
As for Intel, they can largely control their own destiny. Their main
advantage in this deal is that it will reduce AMD's focus on their
core business, reducing their ability to make competitive processors.
If this merger DOES go through, look to see Hector Ruiz (AMD's CEO)
being unceremoniously fired in about 3 years time when it's clear that
the merger was an utter failure.
-------------
Tony Hill
hilla <underscore> 20 <at> yahoo <dot> ca
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