AMD Acquires ATI Through the Multibillion Transaction

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AMD and ATI reveal their plans to join forces in a transaction valued at nearly $5.4 billion. The combination is to create a processing powerhouse by bringing AMD's technologies together with ATI's strengths in graphics, chipsets and consumer electronics. As the result, here will be a new and more formidable company, determined to drive growth, innovation and choice for its customers, particularly in the commercial and mobile computing segments and in the rapidly-growing consumer electronics market.

AMD's acquisition of ATI will position the new company to deliver innovations that fulfill the increasing demand for more integrated solutions in key market segments while also continuing to develop high quality products that empower customers to choose the combination of technologies that best serves their needs. In 2008 and beyond, AMD aims to move beyond current technological configurations to transform processing technologies, with silicon-specific platforms that integrate microprocessors and graphics processors to address the growing need for general-purpose, media-centric, data-centric and graphic-centric performance. Thus, the combined company intends to empower its customers to create their own unique products and solutions within an open-innovation ecosystem free from artificial barriers to customer success.

AMD, under the terms of the transaction, will acquire all of the outstanding common shares of ATI for a combination of $4.2 billion in cash and 57 million shares of AMD common stock, based on the number of shares of ATI common stock outstanding on July 21, 2006. All outstanding options and RSUs of ATI will be assumed. Based upon the closing price of AMD common stock on July 21, 2006 of $18.26 a share, the consideration for each outstanding share of ATI common stock would be $20.47, comprised of $16.40 of cash and 0.2229 shares of AMD common stock. AMD anticipates it will finance the cash portion of the transaction with a combination of cash and new debt. AMD has obtained a $2.5 billion term loan commitment from Morgan Stanley Senior Funding, Inc. which, together with combined existing cash, cash equivalents, and short term investments balances of approximately $3.0 billion, provides full funding for the transaction.

ATI has received an opinion from its financial advisors that the transaction from a financial point of view is fair to its shareholders. The transaction was unanimously approved by the board of directors of each company. The transaction is subject to ATI shareholder approval, Canadian court supervision of a Plan of Arrangement, and other regulatory approvals including merger notification filings in the United States, Canada and other jurisdictions, as well as customary closing conditions. In the event that the transaction does not close, ATI has agreed to pay AMD a termination fee of $162.0 million under circumstances specified in the acquisition agreement. The transaction is expected to be completed in the fourth quarter of 2006.

AMD expects that the transaction will be slightly accretive to earnings in 2007, and meaningfully accretive in 2008, before the inclusion of ATI acquisition-related charges, based upon AMD's plans to deliver more integrated and advanced platform solutions and thereby improve its position in commercial clients, mobile computing, gaming, media and emerging markets. AMD anticipates that it will reduce operating expenses by approximately $75 million for the combined company by the end of 2007.

The combined company would have achieved approximately $7.3 billion in total consolidated sales during the last four quarters with a workforce of approximately 15.000 employees. Headquartered in Sunnyvale, California, the company will maintain sales, design and manufacturing centers worldwide and major business centers in Silicon Valley, Austin, Texas and Markham, Ontario - all valued centers of innovation for the combined company. AMD's current executive team will be complemented by the addition of ATI President and CEO Dave Orton. Orton will serve as an executive vice president of the ATI business division, reporting to the AMD Office of the CEO, comprised of Chairman and CEO Hector Ruiz and President and Chief Operating Officer Dirk Meyer. In addition, under the terms of the acquisition agreement, two ATI directors will join AMD's board of directors upon closing of the transaction. The collective roster of AMD and ATI's strong customer relationships represents a "who's who" of the computing and consumer electronics industries. Drawing upon a shared culture of customer-centric innovation and engineering excellence, the combined company will be well positioned to meet customer demand for more innovative solutions, system-level engineering and faster time-to-market.

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