AMD to take unspecified ATI charge

Advanced Micro Devices acknowledged Wednesday [12 Dec 2007] it overpaid in its $5.6 billion acquisition of graphics chip maker ATI Technologies, adding to the deepening financial woes of the slumping semiconductor company. AMD said in a filing with the Securities and Exchange Commission it will have to write down the value of the goodwill estimate it attached to ATI when it bought the company in October 2006. AMD said it does not currently know how big the charge will be.

Goodwill refers to the value of intangible assets such as a company's reputation or influence within an industry, or even employee morale, all of which are believed to influence its ability to drive future sales. AMD's final purchase price for ATI included a $3.2 billion allocation for goodwill, nearly three times the value of product technology that ATI had already developed and was working on in its laboratories, according to AMD's regulatory filings.

AMD, which was riding high off several years of impressive market-share gains at Intel's expense, suddenly fell on hard times in the summer of 2006 when Intel struck back with a new product lineup. AMD's finances were hurt by a fierce price battle and slumping demand for its chips, and its deep losses and gloomy outlook forced the company to go to Wall Street earlier this year to help pay down its oppressive debt. AMD's stock price has fallen by 54% since the start of the year in a plunge that has wiped out more than $5 billion in shareholder wealth.

- AMD's recent technical problems with its next-generation quad-core chips don't help either. And for Singapore's Chartered, AMD's newly-renewed partnership with TSMC doesn't help at all. The Intel empire has struck back, and hard. AMD could call their next chip Jedi, or Skywalker, because that's what they'll need.

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