A year after Advanced Micro
Devices’ acquisition of ATI, the Canadian graphics chipmaker, the
merits of the takeover are still unclear to AMD shareholders.

  The company has suffered
four consecutive quarters of losses, its shares are down 39 per cent on
their closing price on October 25 2006, the day the ATI acquisition was
finalised. Gross margins are down 10 percentage points, key personnel
have left the company and AMD has seen Intel move ahead of it in
technological advances.

At a price of $5.4bn, the
acquisition was one of the biggest ever takeovers in the semiconductor
industry. It burdened AMD with debt and restructuring charges and
represented its biggest gamble.

In a conversation with us this week, Dirk Meyer, AMD president, said he never saw it that way.

"Gambling implies we didn’t
have another choice. But we really believed that the only good choice
was to expand our product portfolio.

"We are an x86 CPU
[microprocessor] company and, while the PC industry has been driven for
years by it being the premium component in the box, looking forward,
that’s wrong for our customers and for what users care about."

AMD needed a more complete
platform for the consumer market focused around video, media and
graphics performance not CPU performance, he said. "One year on, we
feel this even more so."

Mr Meyer said the timing of the
acquisition was unfortunate - the microprocessor and graphics
businesses took a downturn for reasons that existed independent of the
acquisition. AMD had problems in its supply chain with its CPUs and
became embroiled in a price war with Intel, while ATI’s next-generation
chips were late and it was beaten to the punch by its rival Nvidia.

He said the departure in the
summer of Dave Orton, ATI’s chief executive, was pretty much as planned
at the time of the acquisition.

New customers are being won
already, he argued. Toshiba had begun using its chips for the first
time in its notebooks because AMD could offer a better integrated
platform with ATI’s graphics chips.

"Fusion" - the full realisation
of the benefits of the merger - is expected in 2009, said Mr Meyer.
This new class of processor that integrates the CPU and the graphics
processing unit (GPU) will combine AMD’s CPU skills with the graphics smarts of ATI’s engineers. By that time, he hopes PCs will be
sold not on the strength of their dual core, quad core or octo-core CPU
capabilities, but on the benefits they offer users in performing
different tasks.