For AMD, ATI Buy Turns Into a Graphic(s) Bloodbath

amd_logo_us-en1Qualcomm said today it has purchased AMD’s handheld graphics unit (acquired during AMD’s $5.4 billion acquisition of graphics chipmaker ATI Technologies) for $65 million. The deal shows that AMD is betting big on full-performance machines, from servers to laptops — rejecting its rival Intel’s  move into the netbook and smartphone world. It also bolsters the claim that AMD paid far too much for ATI back in 2006. So far AMD has written off $3.2 billion from the acquisition, and sold some ATI units — such as this one, and the DTV assets — for a song.

AMD has already passed on making the brains for mobile Internet devices — saying instead it will focus on full-performance, ultra-thin notebooks. Now it’s abandoning the graphics portion of the mobile market to Qualcomm. Should these mobile Internet devices take off, companies such as Nvidia, which offers an integrated CPU and GPU system on a chip that is power efficient, will have a huge advantage over the many chipmakers crowding this market. This is why Qualcomm likely bought these assets, and why Apple is building its own integrated SoC for the iPhone.

AMD doesn’t have the financial strength to play in so many markets, so it has clearly decided to rest the fate of the company on larger, higher performance machines, rather than battery-sipping portable PCs. This may be a smart move, as AMD has tried and failed to enter the mobile market before. Plus, with its high-end processors powering the servers that run computing clouds, a mobile computing world in which a user’s information is stored in the cloud will still generate sales for AMD. But like all big bets without a hedge, this one is risky for a company in an already precarious position.

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