ATi and AMD join forces = Nvidia win?

Jun 14, 2003
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reuters

?NVIDIA's big win?
24 Jul 2006



NVIDIA emerges as a big winner from the merger of AMD and ATI.



Advanced Micro Devices Inc.'s (AMD) acquisition of ATI Technologies Inc. (ATYT) has resulted in a big win - for ATI rival NVIDIA Corp. (NVDA). NVIDIA shares were up over 7 percent in heavy trading on Monday morning. With ATI tied to AMD's plans, it looks like NVIDIA has lost a competitor.

First, consider what the deal means for AMD, the world's No. 2 supplier of computer processors. Its battle with bigger foe Intel Corp. (INTC) has been much ballyhooed lately, and we've commented on it in the past. The gist of our argument has been that Intel's margins are so much wider than AMD's that AMD's historical price advantage has basically been at Intel's discretion. Now that Intel is addressing the threat, AMD's processors have become relatively more expensive than they were compared with those of its rival.

But if business history has taught us anything it's that competing purely on price is a great way to the poorhouse. Indeed, Intel's profit margin in its second quarter ended June, 11.0 percent, was half that of the year-ago period, 22.1 percent. AMD's profit margins are thin enough ? 7.3 percent as of its June quarter ? that competing by price cutting just isn't in its cards.

Instead, this deal seems to mark a strategic change to competing on the basis of technological advantage, with AMD matching its central processing unit (CPU) know-how with ATI's graphic processing unit (GPU) expertise. Presumably, future products will have integration between the two, permitting complete systems that will run more efficiently.

Intel must be breathing a sigh of relief. It will enjoy wider margins on a healthy top line if AMD competes only on technological prowess for a relatively niche audience and leaves Intel to its distribution agreements with Dell Inc. (DELL) and Hewlett-Packard Co. (HPQ).

The market's reaction on Monday morning, then, is to be expected: ATI up substantially, reflecting the premium that AMD is willing to pay for the shares; AMD down substantially, reflecting dilution, new debt and the $2.5 billion in cash paid for the deal; and Intel shares up slightly reflecting an improved competitive situation. What may surprise is NVIDIA's 7-percent-plus price gain.

Of course, there's probably some speculation that Intel will make a bid for NVIDIA. We don't consider this to be likely. Intel gains little against AMD with NVIDIA that a technology-sharing agreement wouldn't provide, and NVIDIA has no particular need to sell out, as we'll soon see. Even so, speculatively, Intel could make an acquisition of this size, as it had $6.4 billion in cash at the end of July to NVIDIA's $6.8 billion market cap.

But NVIDIA and ATI were bitter rivals in graphic processor units (GPUs), the core of 3D video hardware in both PCs and video game consoles. NVIDIA's GPU division accounts for 66.4 percent of revenues and 127 percent of operating income - its handheld GPU and "other" divisions lose money. It is also worth considering that both companies - and Intel and AMD, for that matter - are in the PC motherboard market. To this point, excepting Intel and AMD, all motherboard manufacturers have product lines that are geared toward one or the other CPU core. In NVIDIA's case, its motherboard division accounted for 3.0 percent of operating income on 17.4 percent of consolidated sales.

Let's back up a moment, and think about AMD's strategy again: If its ultimate goal is to wrest market share from Intel, what good does it do for it to actively impair NVIDIA products from working with AMD CPUs? There is no benefit; indeed, such a strategy would be self-defeating.

With the announcement, then, one of NVIDIA's primary competitors in the Intel-based motherboard space has effectively gone out of business. Brian Piccioni, of BMO Capital Markets, said in a note published that "it seems likely that (NVIDIA) will, within 12 to 18 months, have the highly profitable high-end discrete GPU market all to itself."

We can reasonably expect some margin improvement company-wide as well - after all, there's no need to market against a non-existent foe. Piccioni put it best: "While it may not be immediately evident, this transaction may the best thing to happen to NVIDIA in a long time."
 

fierydemise

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Apr 16, 2005
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Who wins really depends on who you ask but the general pattern I'm noticing is the tech sites are calling nVidia the big loser and the market analysts are declaring them the winner.
 
Jun 14, 2003
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Originally posted by: fierydemise
Who wins really depends on who you ask but the general pattern I'm noticing is the tech sites are calling nVidia the big loser and the market analysts are declaring them the winner.


well i really dont know what to make of it to be honest. AMD are a big company but i didnt think they were that big. what exactly can they offer ATi? or is it more a case of what ATi can do for AMD?

bar getting some really nice ATi Based AM2 boards, maybe with decent integrated graphics all jimmied together to work with the utmost efficiency i cant see this boosting ATi any.

i think ATi are just going to continue as they were GPU wise, only now they must answer to the head honcho at AMD. id expect their chipsets to become even better than they already are too

and well if Nvidia's stocks have gone up then i guess for now in a business sense, they are on top
 

fierydemise

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Apr 16, 2005
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Originally posted by: otispunkmeyer
Originally posted by: fierydemise
FS's view on the buyout


In the short run, ATI can expect to benefit from AMD's marketing and maybe money

ha that made me chuckle


the last time i saw an AMD advert was........... well, never.

You're obviously not a cycling fan, AMD advertises a fair amount during the Tour de France and they are one of the major sponsors of The Discovery Channel Team (Lance Armstrong's old team) with their logo on the shoulders of all the jerseys, however outside of that there isn't much. Neither ATI or AMD advertises well but ATI's advertising is so poor AMD's is better by default.
 

DAPUNISHER

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Originally posted by: otispunkmeyer



the last time i saw an AMD advert was........... well, never.
Never-the-less, they exist ;) Starting with the French Stewart Athlon "train" ad. More recently the lance armstrong commercial. Obviously nothing compared with the eleventy billion Intel ones, but, now you can't say you have never seen one brudda :D
 

ZimZum

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Aug 2, 2001
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ATI tells nVidia "The writing is on the wall"

ATI just released the July Street News Flash, which was published in response to the recent news of an AMD takeover. There are just too many good quotes in this one, so we thought we'd just quote the whole news flash in its entirety:

On ATI's Intel License: There is no truth to the rumor that Intel has pulled ATI's chipset license. We continue to ship Intel chipsets under license.

On AMD's commitment to GPUs: The merger with AMD reinforces ATI's position as the world's best GPU supplier. AMD is absolutely committed to maintaining and extending that leadership. The merger gives access to AMD technologies and resources - for example, custom memory design - which will raise performance and reduce costs, further increasing ATI's competitiveness. Also, AMD has been extraordinarily effective in the channel, and access to their know-how, experience, and network, will be a powerful plus for ATI.

On Intel platforms: AMD acquired ATI so it could be the world's number one graphics processor supplier. AMD is absolutely committed to supporting graphics on Intel platforms. Hector Ruiz, AMD's CEO, made this completely clear on the conference call that announced the merger. He stated that AMD wanted to increase choice in the market, and that included ATI graphics on an Intel platform.

On the gift to Nvidia: Nvidia has seen the writing on the wall, and doesn't like what it's saying. The PC market is a tough place to be without any friends. ATI now has all the resources of AMD behind it, and will be producing faster, more compact GPUs and reaching the channel more effectively than ever before. Nvidia's words are bravado, designed to confuse the market while the company tries to find a way to compete now that it's standing alone.

Link
 

Wreckage

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Jul 1, 2005
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This backs up my Tin Foil Hat Theory

it seems likely that (NVIDIA) will, within 12 to 18 months, have the highly profitable high-end discrete GPU market all to itself."

It seems odd that with NVIDIA & AMD so close and the 2 CEO's even friends that they would screw over NVIDIA. However if they worked out a deal behind closed doors so that NVIDIA gets rid of the competition and later pays AMD for a slice of it to cover AMD's debt.......

Guess we will never know for sure, but in 2 years we should have a pretty good idea.
 
Jun 14, 2003
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Originally posted by: DAPUNISHER
Originally posted by: otispunkmeyer



the last time i saw an AMD advert was........... well, never.
Never-the-less, they exist ;) Starting with the French Stewart Athlon "train" ad. More recently the lance armstrong commercial. Obviously nothing compared with the eleventy billion Intel ones, but, now you can't say you have never seen one brudda :D


i tell a lie, if you look at schumachers ferrari close enough you can find the AMD logo. and if your ever lucky enough to see in the pit garage AMD powered laptops and servers are abound!

for me intel are the only major advertising i see. they at least have TV ad's. NV seem to have a fair deal of internet flash ads, where as Ati dont. but they do get coverage of their stuff from the AIB partners like powercolor who also have similar flash ads

still i suppose combining two lacklustre marketing teams cant hurt lol
 

thilanliyan

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Jun 21, 2005
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Originally posted by: otispunkmeyer
i tell a lie, if you look at schumachers ferrari close enough you can find the AMD logo. and if your ever lucky enough to see in the pit garage AMD powered laptops and servers are abound!

Yes I was about to mention the Ferrari F1 team. Of course the Intel sponsored BMW has much larger Intel logos than the AMD badges on the Ferrari.

OT but...of course they don't look as good as the McLarens. Too bad they don't have another John Player Special sponsored car (those old JPS Lotus cars are some of the most beautiful F1 cars).
 

DAPUNISHER

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Aug 22, 2001
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Originally posted by: Ulfhednar
Dell advertise more than anyone, does that make Dell the best? :roll:
If best is judged by market share, then yes, Dell is the best! ;)

 

fliguy84

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Jan 31, 2005
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Originally posted by: fierydemise
Originally posted by: otispunkmeyer
Originally posted by: fierydemise
FS's view on the buyout


In the short run, ATI can expect to benefit from AMD's marketing and maybe money

ha that made me chuckle


the last time i saw an AMD advert was........... well, never.

You're obviously not a cycling fan, AMD advertises a fair amount during the Tour de France and they are one of the major sponsors of The Discovery Channel Team (Lance Armstrong's old team) with their logo on the shoulders of all the jerseys, however outside of that there isn't much. Neither ATI or AMD advertises well but ATI's advertising is so poor AMD's is better by default.

And if you're an F1 fan, AMD has been sponsoring the Ferrari team since forever
 

Pocatello

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Oct 11, 1999
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We won't know for a couple of years, who the winners or losers are. Perhaps the biggest losers will be the consumers.
 

Gstanfor

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Oct 19, 1999
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Originally posted by: DAPUNISHER
Originally posted by: otispunkmeyer



the last time i saw an AMD advert was........... well, never.
Never-the-less, they exist ;) Starting with the French Stewart Athlon "train" ad. More recently the lance armstrong commercial. Obviously nothing compared with the eleventy billion Intel ones, but, now you can't say you have never seen one brudda :D

I think this was AMD's best advert ever and is a serious contender for best "David vs Goliath" ad ever too (dates back to the race to 1 gig and beyond days for the newbies).

EDIT: Otis, could you please shorten the link text - it breaks readability with larger fonts (have to scroll horizontally).
 

DAPUNISHER

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Originally posted by: Gstanfor
Originally posted by: DAPUNISHER
Originally posted by: otispunkmeyer
][


the last time i saw an AMD advert was........... well, never.
Never-the-less, they exist ;) Starting with the French Stewart Athlon "train" ad. More recently the lance armstrong commercial. Obviously nothing compared with the eleventy billion Intel ones, but, now you can't say you have never seen one brudda :D

I think this was AMD's best advert ever and is a serious contender for best "David vs Goliath" ad ever too (dates back to the race to 1 gig and beyond days for the newbies).

EDIT: Otis, could you please shorten the link text - it breaks readability with larger fonts (have to scroll horizontally).
Yeah, that is the one I was talking about. I have that on my RAID5. French Stewart from 3rd rock from the sun is the game show host, and stewart pankin from the old HBO series NNTN is the guy on the PC.
 

Gstanfor

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I would have given a lot to be a fly on the wall in Andy Grove's office the day he saw that advert...
 

JBT

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Originally posted by: Ulfhednar
Dell advertise more than anyone, does that make Dell the best? :roll:

and who in your opinion is a better OEM PC manufacterer???
 

5150Joker

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Feb 6, 2002
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www.techinferno.com
Originally posted by: Ulfhednar
Dell advertise more than anyone, does that make Dell the best? :roll:


They make the best laptops (their own brand and Alienware) and desktops as well (XPS 700 is a nice desktop system and as I said they own Alienware).
 
Jun 14, 2003
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Originally posted by: DAPUNISHER
Originally posted by: Ulfhednar
Dell advertise more than anyone, does that make Dell the best? :roll:
If best is judged by market share, then yes, Dell is the best! ;)


well thats how the bean counters rank it. the more of the market you have and the more money you make = winar! and who cares if a mom n pop store round the corner makes better PC's
 

tuteja1986

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Jun 1, 2005
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Originally posted by: otispunkmeyer
Originally posted by: DAPUNISHER
Originally posted by: Ulfhednar
Dell advertise more than anyone, does that make Dell the best? :roll:
If best is judged by market share, then yes, Dell is the best! ;)


well thats how the bean counters rank it. the more of the market you have and the more money you make = winar! and who cares if a mom n pop store round the corner makes better PC's

When Dell does an Add it promotes Intel CPU exclusively