AMD's recent purchase of ATI is a "risky bet", Gartner has warned.
According to a newly published report from the analyst firm, graphics rival nVidia is likely to prevail in the short term as AMD integrates ATI.
The warning comes after AMD announced that it has agreed to acquire ATI for $5.4bn in cash and shares.
"AMD is betting that having graphics and chipset capabilities in-house will enable it to take market share from Intel. On completion of this deal, AMD will be able to offer AMD-branded systems that compete directly with Intel’s platform chipsets and packages and, in the long term, enable it to develop highly integrated graphics and processor silicon," stated the report by Gartner analysts Christian Heidarson, Brian Gammage, Martin Reynolds.
"AMD has promised tangible results from this deal during 2007, which we anticipate will include a system-in-package design for notebooks. Such integration will deliver longer battery life than is offered by AMD’s current solution."
However, the report notes that the ATI acquisition will inevitably alienate AMD existing partners nVidia, SiS, Via and Broadcom.
"Intel could take advantage of this situation and put pressure on AMD by helping nVidia capture a larger share of graphics revenue associated with Intel-based systems," according to the Gartner study.
On the plus side Gartner notes that AMD has identified an opportunity to add value to ATI's offerings by bringing x86 capabilities to components for mobile phones and digital TV devices.
"Overall, acquiring ATI is a risky bet for AMD. Its market share gains must be large enough to make up for the high price of the acquisition, the attrition of ATI’s Intel-related business, declining margins in a consolidating PC industry, and the risk that the consumer electronics business it has acquired with ATI may languish in the shadow of AMD's focus on microprocessors," Gartner reported.
PC and server buyers are advised by Gartner to take no action in respect of AMD's move, as the acquisition will not have any immediate effect on product portfolios from leading PC suppliers.
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