Info News To You: AMD to Buy Chip-Maker ATI for $5.4B

Monday, July 24, 2006

AMD to Buy Chip-Maker ATI for $5.4B

Advanced Micro Devices Inc. said Monday it will pay $5.4 billion to acquire top graphics chip maker ATI Technologies Inc., as Intel Corp.'s biggest rival in the market for personal-computer microprocessors attempts to expand its product portfolio.
The AMD-ATI marriage could shift the balance of power in the chip industry in significant ways. AMD's product portfolio which has remained limited to the microprocessors that act as a PC's main calculating engine would balloon overnight, as it folds in two major new chip categories.

Markham, Ontario-based ATI, which makes chipsets and graphics chips for PCs, also makes a host of semiconductors for consumer products, such high definition TVs and cell phones.
The new offerings would broaden AMD's package of products as it takes on Intel, the world's biggest chip maker that has long supplied a wider portfolio. In addition to supplying microprocessors, Intel, the world's biggest chip maker, sells so-called chipsets, which connect a microprocessor to a PC's other core components. It also sells graphics chips, which power images rendered by computer games and internet video.
Under terms approved unanimously by both companies' boards of directors, Sunnyvale, Calif.-based AMD will pay $4.2 billion in cash and 57 million AMD shares to acquire all of ATI's outstanding stock, according to a news release.

Based on AMD's closing share price of $18.21 on Friday, the deal valued ATI's shares at $20.47, a premium of almost 24 percent compared with ATI's Friday's closing price of $16.56 on the Nasdaq Stock Market. ATI shares surged almost 17 percent to $19.32 in pre-market trading after the news. AMD shares fell more than 6 percent to $17.10.

AMD, which has been shelling out billions to add factory capacity so it can better compete with Intel Corp., will pay for the acquisition with the help of a $2.5 billion loan from Morgan Stanley.
AMD expects the deal to contribute "slightly" to earnings next year and add "meaningfully" to profit by 2008. The purchase will save the combined company about $75 million by the end of 2007. By DAN GOODIN, AP Technology Writer


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