AMD Predicts Profitability for 2008; Admits ATI Lost Value in 2007

AMD’s acquisition last year left many analysts applauding and enthusiasts shouting for joy.  But one question continued to nag all but the most oblivious — did AMD overpay for ATI? 

ATYT was valued by AMD at $3.2 billion at the time of the October 2006 acquisition.  However, according to AMD’s most recent December SEC 8-K filing, the company announced that its goodwill value of ATI Technologies was impaired.

AMD’s Drew Prairie explains the filing. “Goodwill is the value of ATI operations minus assets; it’s what the company is worth in terms of its customer relations, intellectual property, etc.”   Prairie sums it up succinctly, “During our annual evaluation, which we performed last week, the goodwill value of ATI is lower than our estimate from last year.”

Nicholas Aberle, Caris & Company semiconductor analyst was not caught off-guard by AMD’s announcement. “The only surprise we had was that it took so long for AMD to admit,” he claims, adding that a considerable chunk of ATI’s value was destroyed in the transaction.

ATI Technologies is certainly worth less than when it was last year during the merger purchase, but AMD won’t say how much, yet. 

“Dave Orton must be giggling all the way to the bank,” adds Global Tech News contributor John Lewis.  Orton certainly isn’t banking on his 30,000 AMD shares, as the company stock posted a 52-week low today.  Yet there was much speculation that AMD overpaid for ATI Technologies — a figure roughly, but consistently, estimated at around 20 percent. 

On an analyst call today, AMD CEO Hector Ruiz vowed the company would return to profitability next year.  “We have gone through a very difficult time, reacted quickly and decisively and we are on our way to really have, I believe, a phenomenal transition year in 2008,” Ruiz said.

Prairie also remains optimistic for the future.  “A large part of our acquisition is not about the products that we have, or will have next year.”  He adds, “Looking at it in the last year, or the next year, is a short time slice to rule out the fruits of the merger.” 

The first of the products developed solely inside the ATI-AMD merger include the 2009 Fusion platform, a technology that will place elements of ATI graphics technologies on an AMD microprocessor.

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