AMD buys out ATI to create full service chip company

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AMD has spent $5.4 bn buying graphics specialist and chip manufacturer ATI in a deal signed this weekend.

The new company will combine AMD's PC processor businesses with ATI's capability to manufacture graphics and consumer processors on a large scale. AMD said it expected the first benefits of the deal to be forthcoming by 2007 with significant additions to the bottom line by 2008.

"Bringing these two great companies together will allow us to transcend what we have accomplished as individual businesses and reinvent our industry as the technology leader and partner of choice," said AMD chairman Hector Ruiz.

"We believe AMD and ATI will drive growth and innovation for the entire industry, enabling our partners to create differentiated solutions and empowering our customers to choose what is best for them."

AMD is paying $4.2 bn in cash for the company with the rest of the deal using AMD stock. Job losses are expected to follow AMD's announcement that it intends to cut $75 million in costs by the end of next year.

The deal also gives AMD new clout in the increasingly important graphics market. Many of the improvements in Windows Vista are based around improved graphics and Microsoft welcomed the merger.

"Windows Vista will deliver incredible advances in the user experience as a result of advancements in graphics integration and performance," said Jim Allchin, co-president of Microsoft's Platforms & Services Division.

"We're excited by the potential of what AMD and ATI can deliver together to enhance the Windows Vista experience for our customers even further."

The deal is not thought to affect Intel's current licensing deal to use ATI's Crossfire platform but is expected to mean a closer relationship between ATI's rival Nvidia and the world's biggest chip company.

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