AMD to buy ATi for $5.5 Billion

[Steve]

source: http://money.cnn.com/2006/07/21/tech...n=money_latest

Advanced Micro Devices, the No. 2 supplier of computer processors, is close to a deal to buy graphics chip maker ATI for $5.5 billion, a source familiar with the situation said on Friday.

Any such deal would shake up the processor industry, which is witnessing a battle over market share between AMD and larger rival Intel (Charts).

ATI (Charts) is one of two major graphics chips makers, along with rival Nvidia (Charts), and is a big supplier of chipsets - the cluster of secondary chips and interfaces that surround a computer's processor - to both AMD and Intel.

Unless talks break down, a deal could be announced as early as Monday, the source said.

ATI declined to comment, and an AMD spokesman could not be immediately reached for comment.

Shares of ATI rallied on Friday on renewed speculation that a deal was close at hand.

After gaining 83 cents, or 5.3 percent, to close at $16.56 on the Nasdaq market in regular trade, the shares jumped another 7 percent to $17.68 in after-hours trading on Inet. On the Toronto Stock Exchange, the stock finished 99 Canadian cents higher at C$18.77.

Rumors that AMD could purchase the Canadian graphics chip maker surfaced in late May when an analyst suggested the move could make AMD more competitive with Intel. The speculation sent ATI shares surging about 10 percent.

Some analysts have questioned the rationale for an AMD-ATI merger, and others were surprised that the speculation received no attention from analysts during AMD's earnings conference call on Thursday.

AMD shares closed at $18.26, down $3.39, or 15.7 percent, on the New York Stock Exchange as investors worried that the company would not be able to continue grabbing market share from Intel.