Thursday, March 4, 2010

Diversification

Diversification

Diversification is a strategy for company growth through starting up or acquiring businesses outside the company's current products and markets. (p.44 Kotler)

During AMD’s brighter day’s as a producer of microprocessors from the early to mid 2000’s, the company acquired the GPU producer ATi in a blockbuster deal in the computer world. AMD and ATi are one of two major players in each of their respective industries, with their only rivals being Intel and nVidia respectively. AMD’s acquisition helped the company have more power in the computer hardware industry with the ability to produce high quality video cards and motherboard chipsets. The acquisition was vitally important to AMD with their struggles from 2007 to 2009, due to the poor performance of the Phenom 1 CPU architecture, as the revenues from the video cards of their ATi division was what kept the company afloat. A great advantage for AMD is that they are able to tap into a new market of customers. Computer builders who swear loyalty to Intel over AMD are buying the company’s ATi video cards due to their price/performance over nVidia’s counterparts.

The company’s goal for the future is the implementation of a new technology that merged the GPU and CPU, code named Fusion. Interesting enough, AMD/ATi’s rivals Intel and nVidia are also looking to do the same with Intel’s Larrabee and nVidia trying to get into microprocessor production. These two companies are at a serious disadvantage to AMD/ATi, however, since they must develop their technologies from scratch which costs them billions of dollars and many years to get it down right.

The year of 2010 will be very interesting for the company with AMD making a comeback with its new processor line up and ATi’s complete domination of the DirectX 11 Video card market with its Radeon 58xx series.

Frank Luong, Section G

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