AMD to take a charge for overpaying in acquisition

Advanced Micro Devices Inc. acknowledged Wednesday that it overpaid in its $5.6-billion acquisition of graphics chip maker ATI Technologies Inc., adding to the deepening financial woes of the slumping semiconductor company.

Sunnyvale, Calif.-based AMD, the world’s No. 2 maker of microprocessors, behind Intel Corp., said in a filing with the Securities and Exchange Commission that it would 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 did not know how big the charge would 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 bought ATI to bolster the graphics capabilities of its chips and add valuable “chipset” technologies to its product lineup.

Chipsets are responsible for sending data from the microprocessor to the rest of the computer.

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 this year to help pay down its oppressive debt.