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AMD: To Merge Or Not To Merge?

Failed AMD-Nvidia Merger, Take One

However, with the recent talk about Nvidia buying ATI, it would be only logical to go back at that point in time when AMD wanted to buy Nvidia. In fact, Nvidia was AMD's first choice for acquisition. At the time of negotiations, AMD's market cap was $23 billion, and Nvidia was worth somewhere in $11-13 billion range, or just about dead-even between merger and acquisition. We're talking about the second half of 2005, and AMD was looking into ways to respond to upcoming Intel threats called Nehalem and Larrabee. We learned that it all fell apart because of a fallout between Hector Ruiz and Jen-Hsun Huang, Nvidia's CEO. Huang wanted the CEO position, a position that Ruiz did not want to surrender. If that merger had gone through, we would probably have a monster semiconductor company right now, with Athlon 64, Phenom, Opteron and GeForce, Quadro and nForce dominating the market, regardless of the strength of weakness of some components in the package.

AMD turned its focus to ATI, and merger talks between AMD and ATI began at the very end of 2005. The deal was set to happen by March 2006, and it was publicly announced on July 24th, 2006. The Inquirer wrote an excellent analysis on the subject, but the fact remains that ATI was a second pick. If AMD had been smart enough, an acquisition of Ageia would have provided the company with a foothold in the physics segment, instead of constantly making two steps forward and one step back.

  • teleclarke
    Here's a curveball. Why doesn't Comcast move into the chip world? Comcast just threw a bunch of money at Clearwire for WiMax deployment, which is to provide one more avenue of pushing content. What if they controlled content, distribution and the end user's equipment via low-cost HTPCs, much like they control the cable box (for the most part, considering the failures of CableCard). This would be a scary situation for MS, Sony and particularly Nintendo (and likely the consumer :p). Bundle Gaming (via HTPC), VoIP over WiMax and cable/fiber, DTV and HS Internet. Vertical integration is the name of the game, not horizontal aquisition, i.e. IBM.
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  • Interesting article. One thing you didn't mention about an acquisition by NVidia are the significant regulatory hurdles to overcome, i.e., antitrust. Such a merger would create a pretty big monopoly in the add-in graphics market.
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