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Officially 10 Years since the ATI AMD merger. Was it a good idea?

FuryXGuy

FuryXGuy

FuryXGuy

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A head to head comparison between ATI prior to merger and post merger as AMD's graphics Divison against nVidia with respect to revenue and profit.

3148823-amd+-+ati+pic+1.png


As one can see. ATI and nVidia were close to each other with respect to revenue and profit, that dropped significantly in 2007 due to the fact that AMD was late with their HD 2000 line up of GPU's and AMD having to write down a lot of the assets of ATI.

AMD graphics division did recover by 2013-2014 to pre merger levels with respect to Revenue and to an extent profit. But nVidia during that same time period, double their revenue and doubled their profits.

As a matter of fact nVidia has more revenue and profit than all of AMD combined.

3148826-amd+-+nvidia+pic+1.png


Who's to blame for this? Look no further then AMD's management at the time and the failures of the Phenom (with the exception of Phenom II) and Bulldozer.

AMD's CPU division took massive losses and it eventually lead to job cuts and strain in R&D Budget in the GPU division which ultimately hurt AMD's graphics division and the PC Gaming market as AMD became lest competitive , especially at the high end (Still no response to the GTX 1070 and GTX 1080 from AMD).


I think it was the logical decision for AMD but poorly executed (in other words good for AMD BUT terrible for ATI and it's employees, many of whom were laid off). It was good for AMD because they got Graphics tech something they would not have and if they were to develop it themselves it would have put them further behind intel with respect to resources and R&D budget. I think the timing of the purchase was poor and AMD paid too much (should not be worth $5.4 billion) and AMD took too much loans to pay for it. It was at the wrong time because Core 2 Duo just came out and it devastated their CPU division, something form which they haven't recovered.


So, what do you guys think? Was it a good idea for AMD to buy ATI?

Discuss and vote below:

http://www.strawpoll.me/11523087/r
 
The company was severely mismanaged (arguably criminally mismanaged) for years. Lisa Su is doing a fantastic job of getting them back on track though. Who'd have guessed that putting an engineer who's an MIT graduate and has worked in the industry for decades would be a good idea? ;)
 
Here's the thing, it's easy to talk about the past and make various models & theories fit retrospectively but it's infinitely more difficult to do so, cogently, for the future. So it would be easy to argue it was a bad idea for ATI but there's just no way to really say they would've been better off on their own. I would also say, because the company isn't dead, it's not clear whether the merger was a success or failure - you can only really assess that when it ends. You could argue about the performance in any given year, but it's harder to isolate what variables are more responsible for that.
 
Also, AMD bought ATI just before the economic crash... not a great time to be taking on a lot of debt (which no doubt they took up to finance the buyout). I would expect this to have directly impacted the level of spend on R&D
 
Up to 2016: NO

in 2015 at one point AMD was worth 1/4 of what they paid for it, a lot of mismanagement and general ffing around. Selling there mobile graphics division to Qualcomm was an idoit’s move.

2017 and beyond: Yes but

Reforming ATI as a proper graphics division again has done wonders the past 12 months, even massive upswing in share prices taking inflation into consideration , ATI+AMD is only worth a little more than what AMD paid for ATI in the first place.

In short AMD with ATI has fumbled badly the past 10 years but there's light at the end of the tunnel
 
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LoadsaMoney said:
Yeah shes doing a fantastic job, no longer able to compete with Nvidia, and massively behind on market share.
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They were in far worse position than they are now when she took over in 2014, with cash flow problems that would have seen them bankrupt by now without the major changes that she's brought about behind the scenes. Expecting her to have solved every problem they had in two years, considering the state of the company she inherited, is completely unrealistic. There's a long way to go, but you'd need to be just plain ignorant not to acknowledge the huge progress they've made under her leadership. Their share price speaks for itself. It'll be over the next few years when products developed under her tenure start coming to market that we'll see how reviving their position in the marketplace goes, now that the groundwork of completely changing how the company operates is done.
 
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I think it was a good idea - but - there has been a few times where they were in a really good position or potentially in one and fluffed it. Going forward they are in a potentially strong position and really need to capitalise on it.
 
Poneros said:
Here's the thing, it's easy to talk about the past and make various models & theories fit retrospectively but it's infinitely more difficult to do so, cogently, for the future. So it would be easy to argue it was a bad idea for ATI but there's just no way to really say they would've been better off on their own. I would also say, because the company isn't dead, it's not clear whether the merger was a success or failure - you can only really assess that when it ends. You could argue about the performance in any given year, but it's harder to isolate what variables are more responsible for that.
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Don't often post in threads like this (enjoy reading and learning) but for this comment, just have to :)

Spot on :) Very well stated understanding of reasoning we often apply to decisions made in the past - a form of bias.

Without sounding trite, it is quite common behaviour for everyone to retrospectively suggest things that should have been done that would have stopped disaster - the "shoulda coulda" statements. But for most part, given the dynamic nature of product development, market forces, a level of predictability is not so easy to define. We can certainly learn from mistakes, see patterns that caused an outcome, but doing this for the future....no so easy.

Still fun to do some conjecture on what could have happened though :)
 
The question of whether it was a good idea or not IMO is mute point, your graphs only look at revenue and profit it completely ignores ATI's cash position which was in dire straits due DX10 debacle/2900 XT.

Also profits are misleading, in this sort of industry a lot of your expenses are R&D which is effectively salaries of people. Most normal business would just show these as an expense, ATI, AMD, Nvidia and Intel can claim that a lot of money they pay in salaries goes to product development that will yield future income so gets recorded as an asset on the balance sheet which inflates there profits somewhat. Actual net cash income from operations is much lower (i.e the actual cash you get in your bank after all your selling and payments to staff and suppliers).

For the consumer it was a good thing AMD came along and purchased ATI otherwise Nvidia would have had monopoly on the discrete video card market in 2006 rather then 2014. ATI needed AMD's collateral to secure funding and AMD need graphics IP for it's APU's so it was a perfect match (just bear in mind ATI wasn't AMD's first choice, it did try to buyout Nvidia before buying ATI).
 
The way I look at it is that ATI were going under and looking at how AMD'S CPU ' S have been over the last good few years, if they hadn't of had the GPU side of things from ATI they might have gone under as well. So in my opinion it was a good move.
 
bru said:
The way I look at it is that ATI were going under and looking at how AMD'S CPU ' S have been over the last good few years, if they hadn't of had the GPU side of things from ATI they might have gone under as well. So in my opinion it was a good move.
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I agree with this.
 
bru said:
The way I look at it is that ATI were going under and looking at how AMD'S CPU ' S have been over the last good few years, if they hadn't of had the GPU side of things from ATI they might have gone under as well. So in my opinion it was a good move.
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I also agree.
 
Toms Hardware | Posted: 14th Febrary 2008 said:
However, with the recent talk about Nvidia buying ATI, it would be only logical to go back at that point in time when AMD wanted to buy Nvidia. In fact, Nvidia was AMD's first choice for acquisition. At the time of negotiations, AMD's market cap was $23 billion, and Nvidia was worth somewhere in $11-13 billion range, or just about dead-even between merger and acquisition. We're talking about the second half of 2005, and AMD was looking into ways to respond to upcoming Intel threats called Nehalem and Larrabee. We learned that it all fell apart because of a fallout between Hector Ruiz and Jen-Hsun Huang, Nvidia's CEO. Huang wanted the CEO position, a position that Ruiz did not want to surrender. If that merger had gone through, we would probably have a monster semiconductor company right now, with Athlon 64, Phenom, Opteron and GeForce, Quadro and nForce dominating the market, regardless of the strength of weakness of some components in the package.

AMD turned its focus to ATI, and merger talks between AMD and ATI began at the very end of 2005. The deal was set to happen by March 2006, and it was publicly announced on July 24th, 2006. The Inquirer wrote an excellent analysis on the subject, but the fact remains that ATI was a second pick. If AMD had been smart enough, an acquisition of Ageia would have provided the company with a foothold in the physics segment, instead of constantly making two steps forward and one step back.
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Failed AMD-Nvidia Merger, Take One >> http://www.tomshardware.com/reviews/amd-merge,1774-4.html

Fast forward to November of 2007. AMD is in trouble and the natural call for Jen-Hsun Huang surfaced again. Approaching Ruiz and the gang with the attitude "what goes around, comes around" and "I want to buy you now" did not go well, we hear. But business is business and is never personal. There was no reason why the deal would not have gone through. All Nvidia needed was enough money to take the company AND the debt. A repeat of the 3dfx charade is not an option here.

However, in order for that to happen, the only way to go was to get support from partners from AMD's eco-system and this is where the trouble apparently started. While Nvidia is achieving record success with sales, it has done so by weakening its partners. From a company that started selling GPUs with memory back in GeForce3 days (and threw Guillemot/Hercules out of the race), Nvidia turned into a company that now sells a complete card, and partners are nothing else but "sticker stampers". This crashed the profits of all the companies involved, and many disappeared. With Nvidia controlling the AIB market for both ATI and Nvidia products, Taiwan would rush into Intel's arms. Memories of what happened with 3dfx when an ex-Siemens CEO took over the company are still livid in the world of graphics card manufacturers.

The second unfavorable factor is the debt-to-equity ratio. Nvidia has a lot of money in the bank, currently about $2.4 billion, but to eat up a company like AMD, it would have to cough up somewhere in tune of $10 billion, since AMD is $5.4 billion in debt.

But with AMD on-board, any rumors that Nvidia is toast would be eliminated forever. Also, Intel would have to face Nvidia on almost every front of its businesses. Nvidia can easily diversify into a networking company (it bought a 3Com team ages ago, which is the reason for the brilliant "plug'n'play" connectivity in nForce chipsets), into a handheld company (APX 2500 is much more important than you might think at first), desktop platforms (Phenom+nForce+GeForce), mobile platforms (Turion+nForce+GeForce), workstation platforms (Opteron+nForce Pro+Quadro), server platforms (Opteron+nForce Pro+Tesla), HPC platforms (Opteron+nForce Pro+Tesla), etc. And, of course, with the recent purchase of Ageia, nothing would stop the company from implementing PhysX in every pore of its DNA.

Sadly, Huang's fault is the fact that he believes in the value of a single company. Just like the company destroyed the 3dfx line-up and did not use the world's second IT brand (Voodoo, just after Pentium) to its full potential, we have no doubt that Nvidia would cannibalize ATI and basically screw up its chipset development, as well as the development of future Radeons. Instead of creating synergy, the company would probably lose valuable time in preparations for the arrival of Nehalem and Sandy Bridge from the CPU side, and Larrabee from the cGPU side.
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AMD-Nvidia Merger, Take Two >> http://www.tomshardware.com/reviews/amd-merge,1774-5.html
 
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