AMD pays $5.4b to acquire chip maker ATI

US semiconductor giant AMD plans to pay $5.4 billion for top graphics chip maker ATI Technologies, a bold move that could help the world's No. 2 maker of PC microprocessors match, or even exceed the capabilities of larger rival Intel, an Associated Press report said.

The Associated Press report said the acquisition would instantly turn AMD into a leading supplier of graphics chips, which render images for computer games and Internet video, and so-called chipsets, which connect a PC's processor to other system components.

Intel, which in the past year has lost ground in microprocessors to AMD but is showing renewed vigor, has long supplied both.

The report said the acquisition of ATI 'would make AMD a bigger player with a more diversified portfolio,' according to Nathan Brookwood, an analyst with research firm Insight 64. It 'would certainly put AMD on a more equal footing relative to Intel.'

ATI, which also supplies semiconductors used in mobile phones and high definition TVs, will also help AMD expand its reach into consumer products, executives said. Intel, which recently sold a division that makes chips for handheld devices, has been trying to break into those markets for years, with limited success.

Under terms approved unanimously by both companies' boards of directors, AMD will pay $4.2 billion in cash and 57 million shares of its own stock to acquire all of ATI's outstanding stock, the companies said on a conference call with analysts.