Thursday, December 06, 2007

gfor said of Dave Orton

gfor left a comment in "A-TItanic comments" that I want to share with all the audience:

You negative comments regarding Orton are misplaced. As the CEO of ATI, his first and foremost responsibility was to ATI shareholders, and he took excellent care of them.

1) He managed to get $5.4 billion dollars for a company that, had it not been sold, was hading for ~$2B market cap by April 07 based on dismal profits and R600 fiasco.

2) He knew full-well what a disaster AMD-ATI would be and did his shareholders enormous favor by demanding cold hard cash. The fact that the outside people most familiar with AMD's finances (ATI management team) did not want to touch their stock with a 10-pole should have set off red flags all over. "We will create a dominant company... yeah, and we don't want to be paid in it's stock".

Orton's ability to get AMD to overpay by the factor of two for his company, and pay the bulk of the sum in cash (which they could sure have used now) is nothing short of a genius. The man was looking out for ATI shareholders and he took great care of them.
According to the wikipedia entry on David E. Orton, he "enthusiastically supported ATI acquisition by AMD and was one of the main forces behind it". The history of this business deal is well understood, so, I won't write contemporary history tratise, but I think that Dr. Ruiz and the rest of the managerial team that approved this catastrophic acquisition did it in good faith, but they were scammed by Wall Street and the ATI personnel into paying twice what ATI was worth in an unnecessary acquisition. They are that naive and they have such inferiority complex that anyone who says "you could do X that Intel can not" will get their attention, even if X is the most stupid thing in the world. [ This inferiority complex also manifests into the sickening submissive attitude towards Microsoft ].

I wrote about this and the broader subject of big mergers in "Big Merger=Bad Merger": The deals receive excellent financial media press, because Wall Street and their Investment Bank branches stand to gain hundreds of millions of dollars in commissions and other fees, so they have every incentive to use their considerable leverage on the financial media to give the big mergers good propaganda. Also, the managers of both companies get richer, a phenomenon explained in links in that article.

This is like departing tenants throwing a party: There is lots of excitement, people come and have a good time, but by the morning, the owner is faced with a mountain of trash, vomit in the floors, the toilets clogged, the garden all trampled and all sorts of weird stuff. The owner is, naturally, the shareholder of the acquiring company.