AMD reorgs, spins off chip manufacturing
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Advanced Micro Devices has announced a reorganization of it’s operations. The manufacturing plants that produce all it’s processors will be spun off as a separate company.
AMD has been going through troubling times as it’s acquisition of ATI has yet to result in synergistic products that can give it an edge over its competitors. Also, AMD’s quad-core processor releases have been hit with snags and Intel has continued to gain market share at it’s expense. Recently, Intel introduces the 6 core Dunnington processor and AMD does not have anything competing in it’s roadmap till second half of 2009. AMD’s stock is down at $4.05 from a 52 week high of $14.73 and AMD recently announced a new CEO.
The spin-off helps AMD reduce the high chip-manufacturing costs and the cost of running expensive fabs. AMD can now focus its business operation around designing PC microprocessors and graphics chips. The spin-off leaves AMD with significant control over Foundry Co. and thus control over it’s manfucaturing needs to meet customer demand.
The new company, Foundry Co., will be comprised of AMD’s factories in Dresden, Germany, and one yet to be built in Saratoga, N.Y. Foundry will make AMD chips under contract but also have the freedom to win business from other chip companies. Foundry will compete with other chip foundry companies like Taiwan Semiconductor Manufacturing; United Microelectronics; Chartered Semiconductor; and IBM Microelectronics.
Most of Foundry Co.’s operating capital will come from Advanced Technology Investment company, an investment firm wholly owned by the government of Abu Dhabi. ATIC will invest $2.1 billion in Foundry—$700 million of which will be paid directly to AMD—for a 55.6% equity stake. AMD will be a minority owner, owning 44.4%. Both AMD and ATIC will be equally represented on the board of directors. Foundry will assume about $1.2 billion, or about 24%, of AMD’s long-term debt.
