AMD and ATI plan Centrino challenger

Why is AMD buying ATI? To create platforms to rival the likes of Centrino by 2007, and by 2008 to have platforms specific to video editing, graphics work and data processing, the companies say

AMD's merger with graphics specialist ATI, announced on Monday, will see "customer-centric platforms" emerge next year to challenge Intel platforms, gain more market share and help break Intel's monopoly, the companies said.

AMD's chief executive Hector Ruiz said the merger, which is due to close in the fourth quarter, will result in platforms for the business and mobile sectors in 2007. "Our strategy is to capitalise on commercial and mobile computing. This will start in 2007. Our customer-centric innovation will transform with solutions-specific platforms." From 2008, the focus will move to more specific areas such as data processing, video editing and graphics.

Ruiz said AMD's platforms will have open interfaces, to encourage the development of an ecosystem of partners. "For a number of years as we talked to customers… one thing they would insist is that we become a bigger player in the mobile ecosystem, and in commercial computing," he said.

The drive towards processing platforms, pioneered in the mass market by Intel with the Centrino mobile platform, made a merger such as this inevitable. "We found it hard to work with four different companies to develop platforms," said Ruiz.

Dave Orton, president and chief executive of ATI, said this does not relate to a view that the PC has a diminished role: "Rather, if you think about the processing technologies involved, general-purpose processors such as CPUs and special-purpose processors such as GPUs need to integrate more freely; 10 or 15 years ago the floating-point processor was built as a separate component, then they were integrated and over time now we see that as a given." With the merger, said Orton: "We can further optimise the PC and at the same time bring the PC into places where the x86 instruction set is valuable".

Executives from both companies said that ATI products will continue to be available to system builders using Intel products, although they expect demand to drop. "If customers are happy, there's no intention of blocking or prohibiting the sale of ATI products to anyone, but we are making our own assumptions that those sales will diminish," said Ruiz.

Under the terms of the deal, AMD will acquire all of the outstanding common shares of ATI for $4.2bn in cash and 57 million shares of AMD common stock, based on the number of shares of ATI common stock outstanding on 21 July.