AMD TO ACQUIRE NEXGEN
(October 24th 1995) Ensuring that Intel Corp will have at least one
serious  competitor to limit its dominance of the desktop, Advanced
Micro  Devices Inc is to acquire NexGen Inc for shares worth $861m - 
agreed terms are 0.8 of an Advanced Micro for each of NexGen's  41m
shares out. The move is widely seen as benefitting both  companies,
NexGen because IBM Corp had proven a less than ideal  chip foundry
and was unable to meet NexGen's requirement, and  NexGen was
therefore running out of cash, Advanced Micro because  its problems
with the K5 answer to the Pentium had crippled its  sixth generation
development effort whereas NexGen is almost  ready with an Nx686 to
challenge Intel's Pentium Pro. 

The  combination will benefit from Advanced Micro's fabrication 
capacity, commitment to making the NexGen parts, and marketing 
muscle, and the K6 design work will be dumped in favour of the 
Nx686. Compaq Computer Corp, Ing C Olivetti & Co SpA and Ascii  Corp
together own 37% of Nexgen and will end up with very much  less of
Advanced Micro. They benefit because NexGen will survive  without
their having to find new money, and where selling their  NexGen
shares in the market would likely have driven the price  dramatically
against them, they can realise their investment by  selling shares of
the much larger Advanced Micro without much  affecting the price.
During the conference call on Friday  evening, Advanced Micro chief
Jerry Sanders hinted that the two  companies would not be able to
challenge Intel in the market for  sixth-generation chips
immediately, saying that 1996 would be "a  transitional year." 

This suggests that it may plan to take time  to make the NexGen chip
pin-compatible with the Pentium Pro; the  Nx586 will not plug into a
Pentium socket and requires a board  redesign. Sanders sees the deal
rescuing his dream of 30% market  share in 1998. The deal will not
please Intel much: it creates a  much more serious competitor, and
one that has the Pentium  designer, Vinod Khosla, on the staff. He
joined NexGen earlier  this year and is expected to stay. Both
companies said that the  deal would not result in any lay-offs and
that NexGen, based in  Milpitas and employing 165 people will become
an Advanced Micro  subsidiary. Atiq Raza, president and chief
executive of NexGen  is to retain his current positions and will
become a vice-president, a member of the Advanced Micro board and the 
company's chief technical officer, and will report to Sanders.  
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