Debt-ridden Advanced Micro Devices Inc., the second-largest global supplier of microprocessors, is
spinning off its manufacturing business into a joint venture with Middle Eastern investors so it can focus on the business of designing microprocessors. The new manufacturing entity, the Foundry Co., will include a soon-to-be-built factory near Albany, N.Y., and two fabrication facilities in Dresden, Germany, as well as related assets and intellectual property rights. AMD and the new JV are getting billions of dollars from Advanced Technology Investment Co., or ATIC, of Abu Dhabi and Mubadala Development Co.
AMD will hold 44.4% of the JV. ATIC will invest $2.1 billion to purchase its 55.6% stake, with $1.4 billion of that going directly to the JV and the rest going to AMD. Foundry Co. will also assume about $1.2 billion of AMD's existing debt, which will help AMD to focus on the design and development of computing and graphics solutions, and hopefully better compete with the industry leader, Intel Corp.
ATIC has committed additional equity funding to the JV of a minimum of $3.6 billion and up to $6 billion over the next five years to build more factories. The first new factory is being built in New York's Saratoga County and is expected to create 1,400 jobs, and, through its operation, to generate an additional 5,000 jobs in the region.
Mubadala Development, an existing 8.1% AMD shareholder, will increase its stake to 19.3%. It will pay $314 million for 58 million newly issued AMD shares and warrants for 30 million more. Mubadala will also have the right to appoint a member to AMD's board of directors.
On the
Movers & shakers front: Doug Grose will relinquish his current role as AMD's senior vice president of manufacturing operations to become CEO of Foundry. Hector Ruiz will give up his recent appointment as AMD's executive chairman and chairman of the board to become chairman of Foundry.
AMD recently named president and COO Dirk Meyer as its chief executive, replacing Ruiz. AMD troubles have much to do with its 2006 acquisition of ATI Technologies Inc., a power play meant to help it catch Intel. With video games, cell phones and computers requiring more speed and memory, and better graphics, AMD made a cash-heavy $5.6 billion acquisition of the graphics chipmaker. But integration proved to be tough, and debt began weighing heavily on its balance sheet. The transaction is expected to close at the beginning of 2009.
For some time now, industry analysts have said AMD needed to find a way to slash manufacturing expenses. AMD shares shot up more than 30% on the NYSE, but retreated to a 15% gain later Tuesday morning.
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Baz Hiralal
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