RSSLower Revenue Signals Trouble for AMD-ATI
By Scott M. Fulton, III | Published September 7, 2006, 11:26 AM
Although the proposed merger of CPU manufacturer AMD and graphics chip producer ATI has cleared regulatory hurdles in the US and ATI's native Canada, an ominous warning issued by ATI after the close of business yesterday is starting to cast doubt upon whether the merger partners can achieve their stated principal objective: to seize the integrated graphics platform market.
Yesterday, ATI said it now projects revenue for its fiscal fourth quarter 2006 to be below the low end of previous estimates, specifically down to $520 million. This despite a stellar third quarter for the company, in which it posted $652.3 million in revenue, with declining cost of revenues that increased margins and bucked the industry trend.
The problem, ATI admits, is a rapid decline in its integrated chipset business for Intel platforms - more rapid than the merger partners anticipated. By merging with Intel's arch-rival, ATI knew it would be losing Intel's business, it just didn't anticipate how soon that would happen.
At the time the merger was announced late last July, both sides were willing to write off that part of the business, saying it produced low margins anyway. Meanwhile, the companies revealed their mutual interest in developing an integrated graphics platform for AMD-based systems that would eventually compete with Intel's popular Centrino platform.
"While we anticipated a decline in future Intel-based chipset business following the announcement of the acquisition agreement with AMD," ATI CEO Dave Orton stated late yesterday, "the decrease occurred much sooner than we expected."
To become a leader in integrated platforms, the two companies are discovering today, you must already have a stake in the market, even if this means supporting your competitor. This may make it more difficult, though not impossible, for the combined company to carve out a new position for itself in integrated platforms.
ATI also cited a supply chain problem among one of its major customers for handheld-based graphics as one reason for the anticipated revenue shortfall. The company stated it expected neither factor to have a long-term impact on revenue, although it abstained from mentioning that AMD is likely to be more affected. At mid-morning, AMD's stock price was down nearly 1.5 percent.
I was using AMD when I had a 468 series and I always had issues with them. Im an intel man all the way....
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I was using AMD when I had a 468 series and I always had issues with them.
Never had a single problem with any of the AMD chips I have had. In fact, all but one I have had are still in use. The one not in use was an old 300Mhz, the mobo died and it was time to get a new computer anyway. I replaced it with a pre-Thunderbird 1Ghz Athlon, which I still use to play movies on my living room television. The others are a Athlon 2000 XP, Athlon 64 3800, and Athlon 64 X2 4400. The first and last are in use as regular user systems, and the middle one is waiting for me to buy another mobo. AMD has always been reliable for me.
Im an intel man all the way....
You can't tell from your username. :P
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This was so predictable, that even I ( a non-psychic ) predicted it upon 1st hearing about it.
Sorry AMD/ATI, better luck next time :p.
Latz, SB
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They'll bounce back... they always do. With the new X1K Video cards coming out soon.. a lot of people are drooling over them.
We'll just have to wait it out. As always.
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Lets hope they all bounce back and forth. Competition is great for customers. That said, if Orton couldn't see this coming, he might not be the right guy for the job.
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Umm...really, this does sound quite stupid to me. I think the main reason for the decline is the fact that ATI is RAISING prices on their video cards WHILE NVIDIA LOWERS their prices.
Well, not sure what that plan will do for them--but right now NVIDIA is winning most of the price-per-punch areas: http://forumz.tomshardwa...oney-ftopict169937.html
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Well, you get what you pay for...
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"By merging with Intel's arch-rival, ATI knew it would be losing Intel's business, it just didn't anticipate how soon that would happen."
DOH!!! That's f-ing hilarious.
"While we anticipated a decline in future Intel-based chipset business following the announcement of the acquisition agreement with AMD," ATI CEO Dave Orton stated late yesterday, "the decrease occurred much sooner than we expected."
I knew that a lot of CEOs were just overpaid c***tail* party fluff, but I didn't really think they were that dumb!
* Another word butchered by the BetaNews censorship filter
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