AMD to buy chipmaker ATI for $5.4 billion

Fierce competitor Advanced Micro Devices (AMD) continues to make life harder for Intel. It just delivered another blow with the announcement of the long-rumored buyout of computer graphics chipmaker and Canadian company ATI Technologies, confirmed this morning. AMD will purchase ATI for about $5.4 billion in cash and stock. There are sure to be pressures on both larger chipmaker Intel and also Nvidia, the second-largest graphics chipmaker after ATI.

AMD is pursuing growth outside of PC and server chips and into the hot market for graphics chips, and ATI is the world leader in this arena, making this morning's announcement significant for several areas. One -- AMD will now be able to compete more effectively with Intel and its integrated computer-based chipsets used in many hundreds of millions of desktop and notebook computers worldwide. Intel has had an integrated processor/graphics solution for quite some time, while AMD has relied on third-party graphics chip makers. That will no longer be the case after the buyout is completed.

Another biggie here outside of just the integration front is that AMD's latest gains at Intel's expense in the personal computer and server market will only be enhanced by ATI technology and products being integrated directly into AMD operations. AMD has faced almost-insurmountable odds for years going head-to-head against the world's largest chipmaker, Intel. But by designing excellent products that are better in many cases than Intel's, AMD has fought ferociously and has made marketshare gains against its larger rival.