"In one fell checkbook signature, the company gained a solid chipset solution [from ATI] that gives AMD an equivalent to Intel's Centrino concept and guarantees system builders a solid road map going forward. It may be the best $5.4 billion the company ever spent."
-- Anders Bylund, five minutes ago
No doubt ATI is a good company, but rival Nvidia (Nasdaq: NVDA ) is no slouch, either. And now there are rumors that Intel (Nasdaq: INTC ) is interested in a buyout. So much for spending $5.4 billion to gain a competitive advantage, eh?
Seriously, what does ATI have that Nvidia doesn't? Both are specialists in chipsets for graphically intensive platforms such as gaming consoles. ATI has the Xbox 360; Nvidia will have the Sony (NYSE: SNE ) PS3. Ho-freaking-hum.
Much ado about Dell
And then there's Dell (Nasdaq: DELL ) , where the story isn't so swell. Think business isn't really so bad? Well, I've got news for you, bucko: Gross margin dropped by 2% from May to August alone.
Dell will make up the top-line shortfall somewhere. How much do you want to bet suppliers will be the one to take a hit? Expect starry-eyed AMD, which simply couldn't wait to announce a partnership with Mike and Kevin's not-so-excellent PC adventure, to be near the top of the hit list.
Great chips, no salsa
Look, I still believe that AMD is a strong and innovative company. This isn't the same also-ran that once made Jerry Sanders look like the Silicon Valley equivalent of Bozo the Clown. Instead, it has top-notch leadership in CEO Hector Ruiz and cutting-edge technology in Opteron.
But that's only half the story. Equally important is AMD's history of cash flow losses and a price war that's killing semiconductor prices and hurting revenue growth. Someday, investors will account for these risks. And when they do, they'll discount the stock accordingly.
So, like I said at the outset of this debate, I wouldn't touch this stock with your money. Or Anders'.
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