AMD, ATI Merge in $5.4 Billion Deal

AMD confirmed rumors Monday and said it was merging with graphics chipmaker ATI in a transaction worth $5.4 billion. The first computer systems that would take advantage of the strengths of the combined company will begin appearing in 2007, the company said.

The merger will allow AMD to offer integrated processor and graphics solutions to its customers. By 2008, AMD plans to introduce new processor configurations that would integrate the CPU and graphics processor into a single unit. The end result will be smaller, more powerful computers.

"ATI shares our passion and complements our strengths: technology leadership and customer centric innovation," AMD Chairman and CEO Hector Ruiz said. "Bringing these two great companies together will allow us to transcend what we have accomplished as individual businesses and reinvent our industry as the technology leader and partner of choice."

A combined company also gives AMD more ammunition in its continued battle with Intel for dominance in the processor industry. The company has made great strides in recent months in catching up with the No. 1 processor maker, however it still remains quite far behind in terms of overall volume.

The transaction also carries financial benefit: while positive impact would be limited next year, by 2008 AMD expects it to have a noticeable impact on its bottom line. Combining the two companies would save as much as $75 million in operating expenses.

ATI CEO Dave Orton will now serve as executive vice president of the ATI division. Two ATI directors would join AMD's board of directors after the merger closes.