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One company will design chips, the other will manufacture them

It’s no secret that AMD has been in trouble lately.  Despite gaining a commanding position in the graphics industry, the chipmaker giant has been beaten by Intel in the microprocessor market.  With AMD's first 45 nm product, Shanghai, forced to try to enter the market at the same time as Intel's second generation 45 nm Nehalem, and with consist quarterly losses something had to be done.

Today AMD announced a shocking decision that will rock the computer industry -- in order to try to stay competitive, it is splitting in two.  From the ashes of AMD will rise two companies. One will design chips and keep the brand name.  The other, officially named the Foundry Company, will manufacture chips.  The two companies will work closely together, but be independent.

The move also came with good news -- two Abu Dhabi companies have elected to inject at least $5.7B USD into the pair of companies.  Most of this money will go to the Foundry Company, which will use it to build a new factory in Albany, N.Y., and to upgrade its Dresden, Germany factory.

AMD retains a 44.4 percent stake in the new company.  The majority ownership belongs to Advanced Technology Investment Company.  Advanced Technology, a company created by Abu Dhabi's wealthy government, has promised immediate investment of $2.1B USD into the pair.  It says it will follow this with an additional investment that could be anywhere from $3.6B to $6B USD.  Despite the majority stake, Advanced Technology consented to have an equal number of votes as AMD on the Foundry Company's board.

Advanced Technology isn't the only Abu Dhabi company to want a big piece of the AMD pie either.  Mubadala Development Company, which bought an 8 percent stake in AMD last November, will pay $314M USD to buy 58 million shares of AMD stock, to bring its stake in the presplit company to 19.3 percent.  Mubadala and Advanced Technology, despite being competitors in some respects, worked together closely on the new deal.

Khaldoon Al Mubarak, chief executive of Mubadala, states, "We generally believe this deal is a game changer for the industry.  It’s bold, and I think it’s smart."

Waleed al-Mokarrab, chairman of Advanced Technology added about AMD's recent struggles, "Yes, it is a cyclical business, but over time the trajectory is always upwards"

The AMD move is a bit of a shock to the electronics industry, but not an entire surprise.  The company recently announced it was $5.3B USD in debt, with only $1.6B USD of cash on hand.  AMD’s chief executive, Dirk Meyer, said the timing was right to turn for help.  He stated, "This is the biggest announcement in our history.  This will make us a financially stronger company, both in the near term and in the long term, as a result of being out from the capital expense burden we have had to bear."

Before AMD can be officially split up, the deal must meet regulatory and shareholder scrutiny.  The deal is expected to be complete by 2009.  The newly spawned Foundry Company will produce chips for others besides AMD.  It will also compete with the independent Asian foundry firms such as TSMC

The split may strike some as a bit ironic as AMD’s co-founder and longtime chief executive, W. J. Sanders III, known as Jerry, once quipped "real men have fabs", according to company lore.  New CEO Mr. Meyer referenced the joke stating, "We feel like we’re still pretty manly at AMD.  Frankly, the math has changed."

The Foundry Company at launch will control AMD's two chip foundries in Dresden, Germany.  One is in need of an upgrade to make modern chips.  Plans will continue to build the larger state-of-the-art Malta, N.Y. foundry, which will cost $3.2B USD.  The state of New York is offering the new company $1.2B USD in incentives to build the plant, as it will employ 1,400 workers.  The Foundry Company will assume $1.2B USD, or roughly a quarter, of AMD's debt



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RE: Terrorist support
By BansheeX on 10/7/2008 11:45:12 AM , Rating: 4
Depends on how you're measuring. If you're measuring in dollars, inflation will send nominal profits upwards so that practically every year you're breaking nominal records. Measuring in terms of real purchasing power, though, the profits may not be that impressive. You could be posting record profits year over year the same way a loaf of bread went from 10 cents to $3 the past 70 years. Nominal records mean nothing, relative value means everything.

One thing is for certain, the U.S. government revenue from taxing gas and oil companies eclipses the profits of the oil companies themselves, and they're not the ones out surveying and drilling and reinvesting. They'll blow it on a failed bank, a useless war, a bridge in the middle of nowhere, overpaid contractors, a study on grizzly bear populations, you name it. You have no idea how much crazy, collusive pork is out there. They're also the ones causing the dollar debasement which is driving up foreign demand. Oil price doesn't increase long-term by companies to ream consumers, or there never would have been all those years of cheap oil to begin with. And they don't increase from speculators, short term trading causes volatility, but at the end of the day the long-term trends are driven by supply and demand. That's why oil dropped $60, but we're still higher than we were two years ago. It's called a bull market.


“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads














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