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Print 35 comment(s) - last by Chocobollz.. on Dec 11 at 1:20 AM

AMD will now own about 34.2% of the spinoff

To say it has been a tough year for the computer industry would be an understatement. AMD has been particularly hard hit, despite being the second largest chipmaker around.

In October, AMD announced that it would be spinning off its chip making facilities into a different company with AMD holding 44.4% of the new chip making company. The spin off resulted in a suit brought against AMD by rival chipmaker Intel over alleged license violations caused by the spinoff of AMD's processor making arm.

AMD announced this week that in an effort to reduce its manufacturing costs and adjust to the current state of the economy it would own even less than the previously noted 44.4% of the chip making spinoff. The majority owner of the spun off chip making division was the Abu Dhabi-based Advanced Technology Investment Company (ATIC) and a minority owner was Mubadala Development.

Amendments between AMD and ATIC will have AMD owning 34.2% of the chip making arm and ATIC grabbing 65.8% of the Foundry. An AMD representative said the sale was due to "changing economic times." AMD is fighting for its survival in the face of falling profits and increased competition. AMD announced this week that it was cutting revenue projections by 25% for Q4 2008.

Other amendments between the owners of the Foundry include a restructured agreement that allows Mubadala to purchase 58 million shares of AMD common stock at a revised purchase price equal to the lower of average closing price per share on the NYSE during the 20 trading days prior to and including December 12, 2008; or the average closing price per share of AMD common stock on the NYSE during the 20 trading days prior to the transaction close date.

AMD released a statement saying, "All other material economic terms of the transaction agreements remain unchanged. ATIC will still invest $2.1 billion to purchase its stake in the Foundry Company, of which it will invest $1.4 billion directly in the new entity and will pay $700 million to AMD."



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RE: My prediction
By mvpx02 on 12/9/2008 4:28:14 PM , Rating: 2
AMD's problem has always been the on the fab side of things, either because they could not produce enough to meet demands or because they had trouble overcoming the hiccups of process size shrinking.

Rather than lead to bankruptcy, this transaction is going to do just the opposite. It will supply AMD with a huge influx of cash & allow it (like ATI) to do what it does best: focus on chip architecture.

Also, this brings into the equation another company with incredibly deep pockets that is directly interested in the growth & success of AMD.

In hindsight, the purchase of ATI (as the market was beginning to slow) was very poorly timed (and like most companies that acquire smaller ones, AMD got screwed by the inflation of ATI's stock price in the months leading up to the purchase, but we'll leave Wall Street's corruption for another post haha), but the success of recent video cards as well as the company's push into the "Complete Solution" market seem to be playing out exactly as AMD would have intended.

Facing challenging economic times, AMD simply appears to be preparing for the long haul by repositioning to focus on its strenghs.


"Intel is investing heavily (think gazillions of dollars and bazillions of engineering man hours) in resources to create an Intel host controllers spec in order to speed time to market of the USB 3.0 technology." -- Intel blogger Nick Knupffer

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