In marriage of 'CPUs and GPUs,' ATI snapped-up by AMD. Is NVidia next?

Summary:In another one of the worst kept secrets in the technology industry, AMD has shelled out $5.4B for Canada-based video and graphics solution provider ATI Technologies.

In another one of the worst kept secrets in the technology industry, AMD has shelled out $5.4B for Canada-based video and graphics solution provider ATI Technologies.  According to the aforelinked Reuters news story:

Talk of a tie-up between the two companies first emerged in May. Over the weekend, the rumors intensified until it was almost considered a done deal on Sunday...Many industry analysts have said it made little financial or strategic sense for AMD to buy ATI outright. But AMD, the No. 2 supplier of processors, said it will use the purchase of Canada-based ATI to expand its product mix and its market share as it battles No. 1 Intel.

This morning, in a before-the-bell, in a press conference giving by the two company's executives, ATI president David Orton referred to the deal as a marriage of CPUs (central processing units from AMD) and GPUs (graphics processing units from ATI). I recorded the entire conference as a podcast. It can be downloaded, played back using the streaming player at the top of this blog, or, if you're subscribed to ZDNet's IT Matters series of podcasts, it'll be downloaded to your system or MP3 player automatically (see ZDNet’s podcasts: How to tune in).

The conference was kicked off by AMD CEO Hector Ruiz who said (excerpts):

Together, we Intend to create a processing powerhouse ... [Our customers have] been asking us to do this for them.  The ATI team will play a key role in defining our feature.  ...  we are confident that the companies and cultures will integrate well together.  With this transaction, we will move from being neighbors [on the motherboard] to being family. ....

During the call, AMD president Dirk Meyer and ATI president Dave Orton confirmed that the companies see a future where graphics technologies are integrated into the microprocessor silicon much the same way that AMD's approaches to component design have on several occasions pressured Intel to rethink its business. AMD already integrates memory controller technology into the same dies as its CPUs.  Some of the repeated themes heard throughout the conference were growth, innovation, choice, and something the executives routinely referred to as "customer-centric platforms" that the executives expect the merged company to begin delivering as early as 2007.  What are "customer-centric platforms?"  As best as can be told from the conference, it refers to a variety of CPU/GPU-integrated solutions, each of which is optimized to service specific applications in the enterprise and personal computing spaces, the mobile handset space, and in consumer electronics.

During the Q&A part of the conference, I asked the executives if this foray into specialized computing solutions across those segments means that we'll be seeing a diminished role for the PC over the long haul and whether this move was positioning the company for that reality.  They downplayed the idea that the PC's role would be diminished and instead spoke of better PCs for the applications that need them like multimedia.  But, given the two companies' ambitions in the mobile market where there are already nearly three times as many handsets than there are PCs, I'm not so sure.  With every day, the generalized PC is increasingly becoming a relic, giving way to devices like dedicated mobile (and connected) gaming consoles as well as the Motorola Q and RIM's BlackBerries that seem every bit as powerful as the PCs that were in the marketplace just a few years ago.

According to AMD president Dirk Meyer, as the two companies look to integrating CPU and GPU onto the same dye, that integration will not initially be necessary for all of the markets that the two companies currently serve.  Meyer said that he sees opportunities to leverage the techniques used by both companies to accelerate workloads on CPUs and GPUs service specific applications.  Referring to Intel, the executives were optimistic that this is another move that will in their words "break the monopoly." 

How Intel will respond is of course a major question. For example, it could make a play for ATI competitor NVIDIA.  ATI and NVIDIA are head-to-head competitors, particularly in the hotly contested gaming market where graphics performance is essential to a smooth realistic experience.  Although the company participates in other technology segments that end up on the motherboards of PCs -- networking for example --- Intel has for the most part resisted any temptation to integrate technologies such as memory and graphics controllers into the same silicon as its processors.  But AMD's approaches to component design have on several occasions pressured Intel to rethink its business.  

Among the many questions asked by analysts during the Q&A part of the conference were ones that drew into question the future of ATI's chipset business, particularly given the widespread usage of it with Intel's platform.  AMD's Ruiz responded that the company is well aware of how this deal puts that business at risk but reiterated that as long as Intel's customers demonstrate a preference for the ATI chipset that AMD would be happy to provide it.

Last week, in my podcast interview of AMD's director of commercial solutions Margaret Lewis, you can hear me asking about AMD's rumored buyout of ATI.  Said Lewis in that interview:

AMD is always looking at "Do we need to acquire this technology ourselves or do we need to partner for that technology. Everyplace we make these decisions, there are many thought processes that we have to put. If we acquire company X and bring that technology in house, then what does it do to the partner community out there... From an AMD standpoint, we need to ensure that the technology that we put in our processor can be exposed to those software solutions that my title loves so much (commercial software solutions). So, we always have to [ask] "Do we have to bring this technology in house as a way for us to make sure that we deliver to our customers the functionality that we want? Can we do that through partnering?" So, you'll probably look at AMD over the next couple of years and having to decide is it in-house or is it partnering?... We'll have to make a business decision.  However, I have to admit it gives a lot of fodder to the news industry so they can speculate.

Well, the speculation is now over.  At least when it comes to ATI.  Now, perhaps its time to speculate about NVIDIA.

Topics: Processors

About

David Berlind was fomerly the executive editor of ZDNet. David holds a BBA in Computer Information Systems. Prior to becoming a tech journalist in 1991, David was an IT manager.

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