NVIDIA and ATI Raising $500M - What For?

[Dave Baumann]

A fairly short news report went out about ATI this evening, that said the following:

Reuters[/url]]WASHINGTON, Jan 29 (Reuters) - Canada's ATI Technologies (Toronto:ATY.TO - News) filed with U.S. regulators on Thursday to sell over time up to $500 million worth of common and preferred shares, debt securities, warrants and stock purchase contracts and units.
Proceeds will go toward general corporate purposes, ATI said in the Securities and Exchange Commission (News - Websites) filing.

A shelf registration gives a company advance regulatory approval to sell securities in one or more separate offerings in amounts, at prices and on terms to be determined at the time of the sale.

Generally speaking one of the reasons this type of move is done for is in order to purchase other companies. Curiously NVIDIA filed one of these only a few months ago for exactly the same amount.

So, who do we thing they are both going for - could it even be the same company? What about SGI...?

 

[Pete]

Is it possible they're selling high to fund future development, or in anticipation of subpar near-future products? Or would this be an unusual transaction to fund R&D or hedge their bets?

Farcically uneducated guesses aside, what would the purchase of SGI net either company?

 

[Tim Murray]

probably some serious friggin IP and patents.

 

[elroy]

Curiously NVIDIA filed one of these only a few months ago for exactly the same amount.

Linky?

 

[MuFu]

They're building their own fabs.

MuFu.

 

[jvd]

Ati is buying all the power vr patents

 

[gkar1]

!!

 

[PurplePigeon]

Not unusual in a hot market

It may well be to fund acquisitions, but it's just as likely that ATI is taking advantage of the frothy stock market to raise some extra cash at a good price. They may not even have a specific purpose in mind at this point.

ATI isn't the only tech company doing this, and with the markets the way they are, it's only a matter of time before <insert your favorite bubble stock from 1999 here> does the same.

 

[Dave Baumann]

On 19-Dec-2003 Forbes[/url]]WASHINGTON, Dec 19 (Reuters) - Nvidia Corp. (nasdaq: NVDA - news - people), a graphics chip designer, filed with the Securities and Exchange Commission on Friday to periodically sell up to $500 million in debt and stock.

Net proceeds from the sale will be used for general corporate purposes and working capital, the company said in a shelf registration statement. Such a filing is designed to give companies advance regulatory approval to offer securities.

As for what would SGI give someone - a truck load of IP, entry into the high end workstation space, probably some engineers still kicking around there, a valuable brand name and a very confy seat on the ARB!! Thats just floated as a suggestion though - I don't know the current market valuation of SGI and hence what it would cost to purchase.

 

[Fred da Roza]

So, who do we thing they are both going for - could it even be the same company? What about SGI...?

Their stock did jump in January from about $1 to $3, even though their losses were higher than expected (due to a $30.5 million debt-related charge) and after sixteen quarters in a row of operating losses.

 

[Arun]

http://quotes.nasdaq.com/asp/summaryquote.asp?symbol=SGI`&selected=SGI`
SGI Market Value: $ 630,991,660

Considering how much cash both companies got in reserve, they probably could go up to $750M to get SGI, a price at which it's possible, but far from certain, they could get them. Also, as someone else said in the thread, SGI has a market value of around double what it had back in the beggining of the month; when that sort of things happen, there's a merger in the air. Nearly always.
Oh, and...
http://www.alias.com/eng/index.shtml
Yet another advantage both companies would have to acquire SGI.

But then again, maybe they want to buy XGI! (or maybe they're getting really, really afraid of Series 5? )


Uttar

P.S.: Good catch Dave.

 

[Mark]

The biggest incentive for either ATI or nVidia to go after SGI would be for the other company NOT to get it.

 

[bloodbob]

There is something we are all forgetting here a major draw back for SGI. SGI are involed in the whole SCO afair although they acknowledge that novell has veoted SCO's termination of the SGI unix licence still doesn't mean that SCO can't sue SGI. ( Yes yes we all know SCO is most likely going to become bankrupt because of all this but you never know there are a lot of stuiped people in this world ).

 

[Enbar]

Here's the real deal...

NVIDIA is planning a stock buy out of ATI, and ATI is planning a stock buy out of NVIDIA. Soon they will both own just over 50% of the other. Wonder what happens then...

 

[digitalwanderer]

Here's the real deal...

NVIDIA is planning a stock buy out of ATI, and ATI is planning a stock buy out of NVIDIA. Soon they will both own just over 50% of the other. Wonder what happens then...

Overnight the cost of video cards increases tenfold most likely...

 

[Sabastian]

I think that this move is an effort on behalf of both companies to build up cash reserves to insure themselves in the future should they have weak earnings. It may be insurance in the case of a price war that they remain competitive. I think the only reason ATi is doing this is because nvidia did it in Dec. It is an effort to remain psychologically competitive possibly. It says to the competition look we can afford to be competitive as well. Over the past few years ATi had 15 consecutive quarterly shortfalls before they could dig themselves out of the hole they financed the whole time period IIRC with a huge war chest of 900 million. (Something in that ball park anyhow.) Now their savings are down substantially and it is time to build these reserves back up. Nvidia possibly learned a lesson from ATi over that time period. I think the building of these reserves is a matter of survival in an extremely expensive and competitive market. Or it could be that they are making designs to purchase outside assets, but I doubt it. A dash of sobriety, I know, it isn't nearly as exciting as speculating about potential absorption of assets such as SGI but IMO more likely.

 

[Ostsol]

Here's the real deal...

NVIDIA is planning a stock buy out of ATI, and ATI is planning a stock buy out of NVIDIA. Soon they will both own just over 50% of the other. Wonder what happens then...

Overnight the cost of video cards increases tenfold most likely...

LOL! And at that point, Intel will -really- own the market!

 

[Arun]

I think that this move is an effort on behalf of both companies to build up cash reserves to insure themselves in the future should they have weak earnings.

Impossible.
NVIDIA already has $500M+ in reserve, and ATI has nearly that too IIRC. Both companies are currently profitable, although not extremely I must admit. This will in no way inflate their balance sheet, as they're going to sell other stuff in it to get this cash.

And I know I'm being no fun, but ATI and NV can't buy each other for just $500M, because they're both worth about $3B Would be an amusing situation though! (theorically, NVIDIA might be able to, because they could triple their capital without the approval of the current investors, while I doubt ATI has that right. Some practical limitations makes this action impossible, however.)


Uttar

 

[Gnep]

Looking at the full press release, it is my uninformed opinion that this is merely a "just-in-case" filing - allowing ATI, should an opportunity arise to either:

a) sell securities when the price is relatively high to improve liquidity/reduce their gearing or
b) make an investment in another company or
c) fund R&D over and above normal levels

Might they need to fund significant R&D for the Xbox 2?

Don't necessarily read too much into this until you hear other stories circulating. This is only part of a puzzle that might not even exist

Gnep

 

[digitalwanderer]

Guys, you're all way off base with this speculation.

I have it on good authority what the money is for, think "massive kegger"...