After the AMD / ATI merger: Will Nvidia GeForce still compete with ATI Radeon?

Markham (Ontario) - The key reason processor producer AMD sought to merge with graphics card manufacturer ATI was to enable itself to produce a complete performance platform for mobile computers, complete with CPU, chipset, and GPU. That ATI was one of the world's two principal producers of high-performance graphics cards for OEMs and system builders was an incidental bonus, based on TG Daily's assessment of the information given it by both companies. But does this mean that after the deal is consummated over the next four months, assuming all regulatory hurdles are cleared, one of the most powerful brands in high-performance computing may gradually cede that market to its chief competitor, Nvidia?

As ATI Senior Vice President Rick Bergman told TG Daily, the answer to that question has yet to be fully determined. "We haven't made any brand decisions yet," said Bergman. "I think everybody in both companies recognizes that ATI has a powerful graphics brand. That's one of the decisions that we just haven't made: What are we going to do with the ATI Radeon graphics brand?"

In June, ATI reported that its fiscal Q3 2006 revenues were a healthy $652.3 million, reflecting a generally upward trend. But after cost of revenues and expenses were accounted for, income for the period just barely topped $27 million, after having reported a loss for the same period a year ago. ATI doesn't break down its income into divisions, so there's no way you can peer into the quarterly numbers to see how much of that revenue comes from Radeon cards, and how much from integrated graphics components - what AMD perceived to be ATI's most desirable feature.

So with AMD pumping $5.4 billion into ATI, exactly how much of that investment reflects AMD's valuation of ATI's stake in the high-performance market? We asked AMD marketing architect Hal Speed. His response wasn't exactly specific. "The mainstream notebook market, as well as the broader commercial client market in desktop and notebook...was really the driving force behind this [merger]," Speed told TG Daily. "Obviously, ATI has a wealth of strength in the notebook segment, both for integrated chipsets and discrete notebook GPUs...The commercial client market is a little different than where we had traditionally been on the consumer/desktop side, so that's really been the driving force behind this."

The ATI acquisition will help AMD gain broader exposure to the lucrative commercial market. Will ATI then continue to provide AMD with exposure to the premium performance desktop market? As ATI's Bergman told us, "Our marketing teams, now that this has been launched, can start doing the market research, and discussing with customers where we go from here. But I expect you'll continue to see ATI and Radeon in the future."

The prospects for Nvidia and Intel

For now, ATI's prolonged presence in performance is an expectation, if not a certainty. What does this mean for Nvidia? With ATI already very likely to lose Intel as a customer, suddenly there appears to be an almost automatic expansion of the relationship between Intel and Nvidia. (CORRECTION 1 August 2006: Contrary to reports, ATI did not lose Intel's bus license.) Although Intel does manufacture its own integrated graphics components already, Nvidia has a powerful and trusted brand, which could conceivably resonate better with some consumers. And with no one else on Nvidia's or Intel's dance card right now, shouldn't we just cut to the chase and declare them a couple already?

"We're certainly not trying to drive Nvidia to Intel," AMD's Speed told us. "We want to continue working with Nvidia, just like we have been. They're a valuable partner for us for chipsets as well as for GPUs." But Speed acknowledged there would be direct competition between the combined company and Nvidia for discrete GPUs, though he declined to specify market segments.

"The good thing is, that's still an open standard," said Speed. "It's a PCI-Express interface, and our goal is to continue to make leading-edge performance GPU cards, and we think competition is good for the industry, and it helps advance performance, and all the consumers and your readers benefit from that."

Rather than render Nvidia a de facto Intel partner, under an understood "enemy-of-my-enemy" theory, ATI public relations director Chris Evenden believes the combined company's strategy going forward is to maintain its current competitive position with Nvidia by keeping it in the loop. "Just because two companies combine doesn't mean that somehow we're going to exclude other companies from working with us on platforms, or any other part of the ecosystem," said Evenden. "We still very much want to work with Nvidia."

Customers will continue to demand choice, Evenden stated, especially with regard to how a system is constructed. So if customers want an Nvidia chip, they should have it. "We're not going to hamstring Nvidia in any way," he said. "We're going to give them exactly the same access to all the information they've had before - which, by the way, is a great deal of access. It's far more than Intel gives anyone in its ecosystem. So we expect Nvidia to carry on very strongly in that area." Nvidia did not respond to our invitation to comment for this and other stories on this topic.