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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 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?


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