The end of an era at Advanced Micro Devices (AMD) came on Monday, as the smaller competitor to Intel and strong rival of Nvidia closed its restructuring deal with two Abu Dhabi investment firms to spin off its manufacturing operations to a separate company.
Dirk Meyer, AMD's president and CEO, said in a statement, 'With the close of this historic transaction, AMD and its committed partners have conceived two strong industry-leading companies capable of charting future courses that will dramatically improve the technology industry.'
In its strategic 'Asset Smart' transaction, AMD received a total of $825 million from the Advanced Technology Investment Company (ATIC) and Mubdala Development Company of Abu Dhabi. ATIC paid AMD $700 million for just over 65 per cent interest in The Foundry Company, as it is temporarily named, which will own all of AMD's former semiconductor chip plants. The Foundry Company assumed about $1.1 billion of AMD's debts tied to the chip factories. AMD received about $125 million from Mubdala Development Company for 58 million new shares of AMD stock plus warrants to acquire 35 million additional shares. Mubdala holds a 19.9 per cent interest in AMD.
AMD said it anticipates that The Foundry Company, in which it will retain 34.2 per cent interest, will announce its new name and corporate logo branding later this week. Under its new name, The Foundry Company will be headquartered in the United States like AMD.
AMD also announced that it appointed Bruce Claflin as chairman of its board of directors replacing Hector Ruiz, who will now serve as chairman of The Foundry Company board. In addition, AMD appointed Waleed Al Mokarrab, CEO of Mubdala Development Company, to its board or directors.
The combined transactions relieve AMD of significant debt to improve its balance sheet in the wake of buying the graphics chip design company ATI in mid-2006 and its significant investments in new semiconductor chip manufacturing technology. The move also follows a couple of years of massive financial losses for AMD that were due mostly to its stumbling, underwhelming launch of its Barcelona line of x86 chips. The company hopes to increase its R&D investment to regain competitiveness and market share against Intel much like it has been able to compete with Nvidia.
Because AMD is giving up majority interest in its chip manufacturing operations with its spinoff of The Foundry Company, Intel has been muttering darkly about AMD's licence to use Intel's x86 chip technology. However, Intel is tangled up in a long-running antitrust investigation by the EU Competition Commission, partly due to complaints from AMD that it took anticompetitive actions in the x86 marketplace to foreclose AMD sales prospects with some of the major PC manufacturers, so it's not very likely that Intel will be able to object too strenuously to AMD's spinoff of The Foundry Company any time soon.
Jerry Sanders, AMD's charismatic founder, once famously said that 'Real men have fabs.' That's still true no doubt, but AMD just sold off nearly two-thirds interest in its fabs, and the world of large scale semiconductor chip manufacturing will never be quite the same. X
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