My previous analysis on July 21, 2005
on AMD+ATI merger had a lot of unknown parameters, now the details of the merger are out
, let's take another look. None of the analysis will change the projection that Intel will be slaughtered, but we will have more accurate insight on the near term impact.
I. Financial impact on AMD
AMD is going to pay $4.2 billion cash and issue 57 million shares of AMD stock. AMD will take a loan of $2.5 billion. For AMD shareholders, this is a great deal. With about 12% dilution, AMD now also becomes the world's largest GPU maker. This is a major boost to AMD's share value. Since ATI will add more than 12% in profit, the EPS impact on AMD will be positive.
AMD's cash position will be tough. However, Hector Ruiz must know something we don't, which makes him extremely confident. The DELL-AMD contract must be huge. I won't count AMD's monetary recovery from its anti-trust lawsuit at this point, but that's at least a few billion dollars in the bag.
The deal won't close until end of 2006, or even 1Q07. So there won' t be an impact for the current quarter. We should expect AMD's revenue and profit to increase for 3Q06.
II. Impact on AMD vs. Intel death struggle
The deal is definitely a major win for AMD. We should expect some major innovations come out from the AMD+ATI merger
. This is not just about putting CPU and GPU on the same die, but fully integrating them in computing. Now AMD can provide full set of solutions in the PC: CPU+chipset+graphics at the highest end of the spectrum for commercial client and mobile market. Again, Intel is left to eat AMD's dust.
AMD(ATI)'s mobile chipsets will be a major boost to the Bulldozer platform due next year. The timing is perfect. Bulldozer will frag Merom like there is no tommorrow. INQ reported those Merom chipsets consume 13 watts. I expect AMD to FAB its mobile ATI chipsets on the same lower power 65nm SOI process in FAB36. Since mobile is the fastest growing segment of the PC market, Bulldozer+AMD Chipset+AMD graphics will be a major major frag.
One thing Intel will also hate is, AMD Crossfire Chipset+GPUs will milk the Conroe market for profit.
ATI had about $100 million revenue from Intel chipset business, that's a small piece to be thrown away. The revenue made from expanding the market (especially mobile) will be billions.
III. Impact on Nvidia
AMD will not ruin Nvidia's business. Nvdia owns 90% of the AMD64 chipset business with its proven Nforce technology. But this business is mainly in desktop and server, as AMD's mobile market share is very small, and ATI already has a big footprint in mobile AMD chipset. Therefore, expect Nvidia to continue to dominate the AMD desktop chipset business.
However, AMD+ATI merger does put Nvidia in a very tough position. Nvdia has nowhere to go, but to fully commit to AMD64.
(1) Nvidia can't get Intel's highend desktop/mobile chipset business. Intel has 100,000 mouths to feed and a large number of those depend on Intel's own chipset business.
(2) Intel won't and can't acquire Nvidia. Intel already owns 35% of the graphics market, adding Nvidia will cause a lot of overlap and will not pass HSR Act review.
(3) In the discrete graphics market, Nvidia's competitiveness will be dependent on performance, which is unrelated to this merger. On PCI-E, both Nvdia and ATI are on equal footing on both AMD and Intel platforms. On Torrenza, I expect AMD to license Torrenza to both Nvidia and ATI, even if there wasn't an AMD+ATI merger. If ATI produces some major innovations on Torrenza, Nvidia will be impacted--but that's not a result of the merger.
(4) Therefore, Nvidia's only oppurtunity lies with an expanding AMD64 market.
IV. Impact on the PC industry
Now everyone can depend on AMD to provide the full set of solutions to break the Intel monopoly. Expect AMD to ODM motherboards from Taiwanese and the circle is complete.
AMD will make CPU+hestsink/fan+chipset+graphics+motherboard. The only things you need to make a PC are memory, hard drive, case and power supply.
The HP+Compaq merger saved HP from certain death
, HP and Compaq was a weak+weak merger.
The AMD+ATI merger is a strong+strong merger. #1 CPU technology vendor
merges with #1 GPU vendor, very little overlap. It's a killer enterprise