It’s official. After many months of rumors and false starts, it’s been announced that chip maker AMD has plans to purchase top graphics chip maker ATI for appx. $5.4 billion. Pending shareholder and regulatory approval, the deal should close in Q4 2006.
AMD will pay $4.2 billion in cash plus $2.5 billion in funding from Morgan Stanley. The company will also issue 57 million of its shares, increasing its share count by 12 percent, and 11 million restricted stock options.
In anticipation of the announcement, Intel is thought to have pulled ATI’s chipset license, so we probably won’t see ATI chipsets for Intel processors for much longer.
The merger should give AMD the ability to develop integrated CPU/GPU products to keep pace with similar products already underway from the Intel camp.
ATI’s chief rival, Nvidia stands to feel the most significant impact from the deal, since they currently make chips for almost 40% of AMD-based systems. The AMD/ATI deal will likely push them towards developing more heavily for Intel-based systems, but with Intel already making their own (albeit crappy) graphics chipsets, they could be left out in the cold.