UPDATE: Advanced Micro Devices Acquires ATI

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Advanced Micro Devices on Monday finalized a deal to acquire graphics processor and chipset maker ATI Technologies, taking the first steps toward providing a more platform-centric sales model to the system builder channel.

The $5.4-billion deal puts AMD in control of the all-important chipset for client systems. System builders have long been calling for AMD to take a more active role in controlling the quality and consistency of components available to the channel.

The acquisition, rumored to be in the works since May, is expected to close in the fourth quarter, according to Sunnyvale, Calif.-based AMD. Eighty percent of the purchase price is in cash and 20 percent is in stock.

"This [acquisition] will enable us to deliver better turnkey, platform-level solutions to our customers," AMD President and COO Dirk Meyer said on a conference call Monday morning.

By acquiring ATI, AMD becomes a "real player" in the system builder channel, said Doug Phillips, vice president of products and solutions at Seneca Data, a large custom-system builder in North Syracuse, N.Y.

"This is exactly what we have been asking for," Phillips said. "We have been asking for AMD to take ownership of the system builder ecosystem."

Intel has long offered a "platform approach" to system builders by coupling its processors with motherboards and chipsets--the key building blocks of a system--that are pretested and certified. That gives system makers a stable platform to offer to demanding corporate customers that want to control IT support costs.

"We've telling AMD for years that they need to make their own motherboards and other platform components to better compete with Intel in the corporate space. I think this is a good step in that direction," said Todd Swank, director of marketing at Nor-tech, a system builder in Burnsville, Minn. "Obviously, if Intel trusted ATI enough to be the first third-party chipset manufacturer for their motherboards, they must have a pretty solid solution."

Pat Moorhead, vice president of global channel marketing at AMD, said the channel will benefit the most from better integration of the ATI chipset in AMD's Commercial Stable Image Program (CSIP), launched last year to boost AMD's presence in the corporate market.

"We have super-tight integration with design and validation and the development of firmware and software that goes with that," Moorhead said.

AMD's mobile platform also will benefit from the stability, as will ATI's discrete graphics option that supports all of new features in Windows Vista, Microsoft's next operating system due to ship in January, he said.

In addition, AMD plans to integrate ATI's channel group with its own, reporting to Henri Richard, AMD's executive vice president of sales and marketing, according to Moorhead.

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