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AMD receives some much needed cash from the Middle East

Things haven't been going AMD's way ever since the acquisition of ATI Technologies in 2006. The company has been assaulted by Intel's Core-based processors in the desktop, server and notebook markets and its graphics offerings still are outgunned by NVIDIA -- even with the newly introduced Radeon HD 3870 and HD 3850.

As a result, the Sunnyvale, California-based company has been taking a beating as most recently observed in its Q3 2007 earnings report. AMD recorded a $226 million USD operating loss and $396 million USD net loss on revenue of $1.632 billion USD. $78 million USD of the loss was attributed to AMD's ATI acquisition.

However, things may finally be looking up for the company. Mubadala Development Company, a United Arab Emirates (UAE) government-funded investment firm based in Abu Dhabi, has acquired an 8.1 percent stake in AMD for $622 million USD. The company received 49 million shares at a price of $12.70. Despite the buy-in, Mubadala will not receive any board representation as a result of the deal.

AMD will receive a total of $608 million USD after repaying Mubadala $14.6 million USD in expenses. AMD plans to use the cash to invest in "research, product innovations and manufacturing excellence." The Business Review reports that some of the funds will be channeled into a $3.2 billion USD chip plant on the Luther Forest Technology Campus in Malta, NY.

"We proudly welcome Mubadala, a world-class investor, to the AMD shareholder family," said AMD Chairman and CEO Hector Ruiz. "This investment strengthens AMD’s ability to deliver customer-centric innovation and choice to the marketplace, creating greater value for all of our shareholders."

For its part, Mubadala's CEO and Managing Director, Khaldoon Khalifa Al Mubarak, added "AMD is a great fit for Mubadala's investment approach -- a spirited competitor and innovator led by a strong and visionary management team. We see significant opportunities for long-term growth and value creation."

Mubadala has been spreading money around quite frequently in recent months. According to Bloomberg, the investment firm captured a 7.5 percent stake ($1.35 billion USD) in the Caryle Group. Some of Mubadala's other investments include Ferrari SpA and SR Technics.

The investment from Mubadala couldn’t have come at a better time for AMD. AMD has faced an incredible amount of debt and not only record losses in Q3 as previously mentioned, but also during Q1 and Q2. The company has also seen the departure of two former ATI executives -- CEO and President David Orton and vice president of worldwide sales Rick Hegberg, as well as executive vice president and chief sales and marketing officer Henri Richard.



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By kilkennycat on 11/16/2007 3:12:23 PM , Rating: -1
... barring a miracle that takes Intel and nVidia off this planet, if AMD does not also reorganize and dump ATi as soon as possible. Acquisition of ATi was a potentially fatal blunder by AMD. Diluted critically needed financial and technical resources in the CPU battle with Intel and completely distracted AMD's business focus.




By sprockkets on 11/16/2007 3:26:49 PM , Rating: 2
When the CPU+GPU makes or breaks AMD, then we will cast judgment on their merger. If this was not a good direction to go, Intel would not be doing it. Due to Intel's resources though, they will probably beat AMD timewise and performance wise.

Oh well.


By FITCamaro on 11/16/2007 3:41:58 PM , Rating: 4
It wasn't just for that. The main reason was because they needed a complete solution to get into the OEM space more. AMD relied on chipsets from third parties for far too long. OEMs want a tried, tested, and true solution. With their acquisition of ATI, AMD got that.

And it has paid off. They are now a much wider partner in the OEM space than ever before. AMD's biggest problem as been price wars with Intel. It's been great for us consumers but hell on them. I mean you can buy a dual core processor now for less money than a good air cooler. And which do you think costs more to produce?

AMD will hopefully eventually come back. Their chips though are still an incredible value. I built a system for my parents recently at an incredibly low cost. I paid $125 for my 3800+ back in like June. I got them a 4200+ for like $70-75.


By theapparition on 11/18/2007 12:52:24 PM , Rating: 3
quote:
I mean you can buy a dual core processor now for less money than a good air cooler. And which do you think costs more to produce?

LOL, actually, the air cooler costs far more to make than the processor.

But it doesn't take billions of R&D and fab costs to make aluminum extrusions and plastic fans. Just some more useless information for nobody to do anything with. :P


By Zurtex on 11/16/2007 3:35:14 PM , Rating: 3
I'd have to disagree with that whole-heartedly.

I think acquisition of ATi was more than risky, I think it also could blow up in their face in 2 - 3 years if they haven't produced anything. But I also think that if everything goes how they vision the best case scenario to be, they will become no.1 for performance for chips in laptop, desktop and server based situations thanks to buying ATi.

As for losing business focus, where, how and when? It's not like AMD ever really advertised much in the first place, so they've not changed their. They've kept their chips enormously competitive in price, I've built way more AMD based computers for people since Core2 came out than before it (because suddenly you can have quite powerful £400 computers).

Everyone else is still years behind nvidia and ATi in their ability to produce stream processors that deliver much higher performance values in specific applications than sequential processors at the same cost.

Investing in AMD could work out well or it could be a complete waste of money. AMD have so much growth potential over the next 5 years it's scary, then again they could just fade against the power of Intel, hmmm :-/.


By Amiga500 on 11/17/2007 3:18:54 PM , Rating: 2
I think acquisition of ATi was more than risky, I think it also could blow up in their face in 2 - 3 years if they haven't produced anything. But I also think that if everything goes how they vision the best case scenario to be, they will become no.1 for performance for chips in laptop, desktop and server based situations thanks to buying ATi.

Absolutely right.

Its a longer term thing - I think the question really is, do they have enough cash over the next 2/3 years to fund the R&D and achieve their potential?


By Vanilla Thunder on 11/16/2007 3:35:19 PM , Rating: 3
I personally think that it was a good move for AMD to acquire ATI. It has been slow going, and in the present may not seem like it's paying off. However, when we hit the Fusion platform on the roadmap, and start seing GPU's on the CPU, people will start to realize that AMD needed to move beyond the CPU battle. I think this is forward thinking on the part of AMD, and I hope it pays off.

V.


By Ringold on 11/16/2007 3:40:32 PM , Rating: 2
I think they'll do alright. For whatever it's worth, I said several moons ago this sort of thing would happen to begin the process of bailing them out. I still look to see them completely bought out at some point for massive reorganization. They just don't have the resources to compete against the Intel dragon which they pissed off with the Athlon64.

Not that I'd buy stock on that idea, but I think it'll happen.


By bryanW1995 on 11/16/2007 6:02:00 PM , Rating: 2
go read anand's blog and his articles on 38x0. ati just went from the anchor to the motor.


By boredg on 11/16/2007 6:12:45 PM , Rating: 2
Im not so sure how this will turn out, but AMD needs the money, and im sure they're happy to get it. Ive lived in Abu Dhabi in the past, and 'mubadala' isnt a very large company compared to some others in the region like the 'Al Futtaim' group which holds large stakes in a lot of different industries in the area.


By KristopherKubicki (blog) on 11/16/2007 6:57:18 PM , Rating: 2
Pricing on the 3870 and 3850 are really good -- I really think they did a good job there. Newegg went out of stock in less than a day.


By Parhel on 11/17/2007 1:30:07 AM , Rating: 2
I'm not at all disappointed with this release, which is a first for any product from ATI or AMD since the merger. In fact, I'll most likely be looking to buy one or the other early next year. After this release, I'm hopeful again that they are going to turn things around.


By clnee55 on 11/17/2007 7:03:18 PM , Rating: 2
ALways hope. Sounds like comunism. ALways hope for a brighter future.

quote:
I'm hopeful again that they are going to turn things around.


By crystal clear on 11/18/2007 12:05:37 AM , Rating: 2
Depends ! on what quantities they recvd.


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