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Playstation 4 News: Nvidia Sheds Light On Why Sony Chose AMD

sony ps4 amd While the 4th edition of Sony€™s flagship console is once again tipped as the most anticipated machine in technological entertainment, the reputable graphic gurus, Nvidia €“ who made chipsets for both the first Xbox and the Playstation range €“ were revealed to have been dropped out earlier this month when Sony announced the PS4 graphics would be handled by AMD. AMD who previously took over ATI is also rumored as the chipset maker for the next Xbox; but Nvidia do not seem to be overly concerned by the loss. Tony Tamasi, Senior VP of content and technology at Nvidia told Gamespot the failure to reach an agreement with Sony was down to €œopportunity cost.€
€œI€™m sure there was a negotiation that went on,€ Tamasi said. €œand we came to the conclusion that we didn€™t want to do the business at the price those guys were willing to pay.€€œHaving been through the original Xbox and PS3, we understand the economics of and the tradeoffs.€€œWe€™re building a whole bunch of stuff€, continued Tamasi, €œand we had to look at the console business as an opportunity cost. If we say, did a console, what other piece of our business would we put on hold to chase after that? In the end you only have so many engineers and so much capability, and if you€™re going to go off and do chips for Sony or Microsoft, then that€™s probably a chip that you€™re not doing for some other portion of your business. And at least in the case of Sony and Nvidia, in terms of PS4, AMD has the business and Nvidia doesn€™t. We€™ll see how that plays out from a business perspective I guess. It€™s clearly not a technology thing.€
AMD will be expecting to cash in on their latest deal with Sony, having been forced to sell its Austin HQ for $ 164 million to raise quick cash earlier this month. Stacy Rasgon from Bernstein Research and Craig Berger from FBR Capital both downgraded the company€™s shares from Outperform to Market Perform in October 2012. Berger wrote that management miscalculated and mis-executed strategies raised the company€™s potential burn rate, while laying off engineers did not help:
We now have less confidence in go-forward cash burn given rapidly declining ASPs and management€™s new refusal to provide gross margin guidance. Thus, we worry about the magnitude of intended pricing cuts and gross margin impacts as AMD€™s cash bleed could intensify. Further, while we previously assessed cash to be sufficient for the next year, we now see scenarios where AMD may raise cash sooner, particularly with pending GlobalFoundries payments and with 4Q12 sales down a whopping 33% YOY. Further, management€™s ongoing misexecution in our opinion seems to be contributing too (building too much inventory, firing top operational managers, channel misalignment, withdrawing from broad swaths of the market). Finally, the firm announced 15% head-count reductions, which will make it more difficult to engineer and sell competitive products.
It's looking likely that the console war won€™t only be waged on the surface, but from within and behind the scene; gamers should ready themselves for what could be a historical benchmark in next-gen gaming. A cause for concern for hardcore Nvidia fanboys? AMD have come a long way and deserve their fate with Sony? Please let us know your thoughts in the comment section below.
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Danny is a consultant, writer & journalist from London into what he describes as a "little bit of everything". He has been into literature, photography & the arts since his teenage years, and has also ended up fluent in French after just over a decade of exposure to the Anglo-French culture of L'Île Maurice. He has an avid interest in psychology, neuroscience, the arts, and his city, London. To find out more about his writings, artwork and other updates, please feel free to visit his website (dpurb.com) or follow him on Twitter (@DannyDPurb)