From the same arguments it's probably more likely to end up with opposite result. Good brand = more money, and how can you get a good brand? By having good/best HE-card. How I see this is that ATi does what it already does, and in addition to that, ATi+AMD will make those integrated solutions to compete with Intel and Intel's very low-end graphic-solutions.
I agree: it wouldn't make sense to spend $5B just to make a 'fusion' CPU+GPU. That said, I'm not convinced they will succeed: tech mergers are extremely difficult to pull off.
There's the period of instability that usually lasts, say, 18 months. During the months after the announcement but before the actual merger, there's a large amount of FUD about future prospects within the company without a lot of possibilities to do something about it: you have 'merger' teams to prepare everything, but they're only allowed to share so much and real decisions cannot be made (or explained.) I've gone through this a couple of times and it can be very demoralizing.
The real fun starts when the merger has closed: at the higher level, execs from different sides start to engage in political chess games to gobble up as much power as they can, making decisions that are not always logical for the engineers (delaying tactics, releasing information to other groups at a slower pace than necessary etc.) Very frustrating all that. Managers are looking for redundancies: they never say there'll be cuts in the engineering staff, but there always are... Architecture staff is usually safe, but you don't need *2* teams desiging chip IO pads or custom memories or PLL's, do you?
There's the differences in design methodology, one side thinking they're doing it better than the other and vice versa. Tool unification is always a way to save money (and most of the time a sensible thing to do), but having sometimes years of specific experience with tool A and being the recognized expert at it, it's hard to abandon all that and switch to something else. Resentment...
And finally (and very important in this case, I think) there's the loss of feeling to work for a special company. A handful of top architects are very important to set the direction and drive the next architecture. They were probably there right from the start of ArtX. They probably made a sh*tload of money when they were acquired by ATI and hailed as the saviors of the company (they were). Joining ATI was the reward of a few years of very hard work and a recognition of their talent.
This acquisition is the opposite: AMD acquired ATI because it was a lot cheaper than Nvidia (from a technical and market point of view, acquiring Nvidia would have made more sense.) ATI dropped the ball, margins dropped, they're just barely making money. This is not the glorious entrance of, well, the savior.
I've been on both side of an acquisition as just an engineer and you can't believe how much difference it makes: you see that the managers that you really respect and trust (yes, they do exist!) don't have the leverage they used to have. And over those 18 months of instability, they are being replaced one by one by someone of the 'other' management.
So suddenly you find yourself working for a 'big' company. Maybe not as big as Intel, but big nonetheless. Your personal contribution will have less impact on the bottom line (even if former ATI gets its margins back to acceptable, the overall impact will be diluted). Even marketing adapts accordingly as super aggressive campains are frowned upon by the laywers. How uncool is all that?
And then one or two top architects decide to leave. Or take a year of absense. Or just become less prolific. And you get a great offer at this sexy new startup. Why stay?
It's not impossible to avoid all that, but it requires a lot of energy that should be spent on getting the next kick-ass GPU out of the door, DAAMIT.
