Advanced Micro Devices acknowledged Wednesday it overpaid in its $5.6 billion acquisition of graphics chip maker ATI Technologies Inc., adding to the deepening financial woes of the slumping semiconductor company.
Sunnyvale's AMD, the world's No. 2 maker of microprocessors behind Intel, said in a filing with the Securities and Exchange Commission it will have to write down the value of the goodwill estimate it attached to ATI when it bought the company in October 2006.
AMD said it does not yet know how big the charge will be.
Goodwill refers to the value of intangible assets such as a company's reputation or influence within an industry, or even employee morale, all of which are believed to influence its ability to drive future sales.
AMD's final purchase price for ATI included a $3.2 billion allocation for goodwill, nearly three times the value of product technology that ATI had already developed and was working on in its laboratories, according to AMD's regulatory filings.
AMD bought ATI to bolster the graphics capabilities of its chips and add valuable "chipset" technologies to its product lineup. Chipsets are responsible for sending data from the microprocessor to the rest of the computer.
AMD, until that point, focused primarily on microprocessors, which are the brains of computers.