AMD and ATI Deal (Almost) Finalized: What's Next?

Now that AMD has purchased graphics-card producer ATI for an impressive $5.4 billion, what are the ramifications for the processing chip market and the tech industry as a whole?

In many ways, AMD is trying to break out of its rut by expanding to markets previously untouched by it or Intel -- a gamble that might be proceeding at a pace too fast for itself or shareholders.

With that in mind, let's take a look at the details of the purchase:

The purchase will cost AMD a reported $4.2 billion in cash, with an additional 57 million shares being provided to ATI shareholders.

The immediate benefit of the acquisition will be the addition of graphics cards to AMD's merchandise, including a number of products from ATI that have proved profitable in its largely successful battle with competitor NVIDIA. (Source: news.com)

So, everything sounds peachy, right?

Not so. The immediate impact of the purchase on AMD shares was actually quite negative. When the acquisition of ATI was first announced, AMD stocks actually slipped significantly, falling 4.8% to $17.37 a share.

Beyond that, tech insiders remind consumers that the deal still has some hurdles before it can be considered official. Although the boards of both companies have approved the purchase, shareholders will have to sign on -- and that could prove tricky. (Source: arstechnica.com)

Firstly, those shareholders will need to be shown that the deal is profitable. Second, there are international factors. ATI is a Canadian company, meaning that the Canadian courts will have the same impact on approving the legalities as the American justice system. Finally, the debt incurred could be difficult to overcome as AMD struggles to assert itself through a bitter (and rather merciless ) price war with Intel. (Source: tgdaily.com)

So, everything sounds terrible, right?

Despite the hesitations of the stock market, many financial experts see the acquisition as a good idea. One analyst from Thomas Wiesel Partners described AMD's deal as "an innovative idea and a pretty visionary way for them to take their business". (Source: arstechnica.com)

Clearly, the deal is a major gamble; perhaps the biggest in the tech industry in recent memory. With both Intel and AMD struggling to keep their heads above water in the second quarter, it will be interesting to see if this acquisition sinks or swims.