RBC Capital Markets downgraded ATI Technologies to `` sector perform '' from `` outperform '' after Advanced Micro Devices announced its intention to buy the Canadian graphics chip-maker for $ 5.4 billion on Monday .
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rbc capital markets downgrade ati technologies `` sector perform `` outperform advanced micro devices announce intention buy canadian graphic chip-maker $ 5.4 billion monday
RBC Capital Markets downgraded ATI Technologies to `` sector perform '' from `` outperform '' after Advanced Micro Devices announced <m> its </m> intention to buy the Canadian graphics chip-maker for $ 5.4 billion on Monday .
RBC Capital Markets downgraded ATI Technologies to `` sector perform '' from `` outperform '' after Advanced Micro Devices announced <m> its </m> intention to buy the Canadian graphics chip-maker for $ 5.4 billion on Monday .
Even though the takeover looks fairly valued , RBC analyst Steve Arthur said there is limited upside to the offer unless competing bids are made for ATI .
For now , Arthur said AMD 's takeover deal , which is expected to close in the fourth quarter , effectively offers his one-year price target of $ 21 now .
That price target was set prior to the takeover bid and factored in ATI 's gross margin leverage , capital expenditure strength , a competitive product lineup and the launch of Microsoft ( nasdaq : MSFT - news - people ) Windows ' new operating system , Vista , which would be a `` net positive '' for graphics-chips vendors .
Without a competitive bid to drive shares higher , ATI is unlikely to outperform , warranting a `` sector perform '' rating in the analyst 's view .
Arthur said a competitive bid is possible but the two most-likely bidders , Intel ( nasdaq : INTC - news - people ) and Nvdidia , face prohibitive anti-trust challenges. Combined , ATI and Intel would have 68 % overall market share in PC graphics , while an ATI-Nvidia partnership would effectively capture 100 % of the discrete graphics market .
Other counteroffers could be made by Texas Instruments ( nyse : TXN - news - people ) and Broadcom ( nasdaq : BRCM - news - people ) , which , according to Arthur , would n't so much face anti-trust challenges as they would compatibility challenges .