Advanced Micro Devices Inc. - AMD

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Check out AMD, its just above a bottom and recently AMD received support from investors in Abu Dhabi. In the past, AMD and Intel chips have shared time at the top in the processor industry, AMD has been saved by the Abu Dhabi investors and could work its way back to the top of the processor industry again.

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Cash-strapped AMD to spin off factories
Abu Dhabi investors will increase stake to 19.3% in joint venture with microprocessor maker; another group investing $2.1B.


Financial move will help AMD compete better with Intel.
AMD pumps up the volume

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NEW YORK (AP) -- In a move to dramatically cut costs and better compete with Intel Corp., chip maker Advanced Micro Devices Inc. said Tuesday it will spin off its factories into a new joint venture with investors in the Persian Gulf state of Abu Dhabi.

The deal should shore up AMD's (AMD, Fortune 500) finances and let it focus on the design and development of computer chips.

The new venture, to be based in the U.S. and for now called Foundry Co., will include AMD's manufacturing plants, including two in Dresden, Germany.

Doubles investment
In conjunction with the spin off, Abu Dhabi's investment arm, Mubadala Development Co., will invest $314 million to more than double its current stake in AMD to 19.3% from 8.1%.

Another entity backed by the Persian Gulf state, Advanced Technology Investment Co., will invest $2.1 billion for a stake in Foundry Co., which also will assume about $1.2 billion of AMD's existing debt.

Advanced Technology Investment then plans to contribute between $3.6 billion and $6 billion to Foundry Co. over the next five years to fund the expansion of the company's chip-making capacity. That plan includes the construction of a new facility in Saratoga County, New York.

Sunnyvale, Calif.-based AMD, the world's No. 2 maker of computer microprocessors, has been saddled with debt and hurt by product delays.

Finances in trouble
Hector Ruiz stepped aside as CEO in July as pressure grew for the company to improve its finances and regain its competitive edge against Intel (INTC, Fortune 500). AMD lost $1.19 billion in the second quarter, nearly double its losses from a year earlier.

AMD's finances have also been hurt by its 2006 acquisition of graphics chip maker ATI Technologies. As part of that buyout, AMD absorbed divisions that make chips for cell phones and digital television sets. Both were underperforming, and AMD wrote down their value by $876 million.

AMD replaced Ruiz with Dirk Meyer, who had been president and chief operating officer, and focused on developing a strategy for cutting its manufacturing expenses, which are large for any semiconductor company but particularly troubling for AMD as it burns through cash and faces fierce competition with Intel.

"With The Foundry Company, AMD has developed an innovative way to focus our efforts on design while maintaining access to the leading-edge manufacturing technologies that our business needs without the required capital-intensive investments of semiconductor manufacturing," Meyer said in a statement.

Foundry's board
Foundry's board will be made up of executives from AMD, which will own 44.4% of the company, and Advanced Technology Investment, which will own 55.6%.

An AMD senior vice president, Doug Grose, is to become chief executive of Foundry Co., and Ruiz, who had been AMD chairman, will step down to take on that post at Foundry Co.

The transaction is expected to close at the beginning of 2009, pending regulatory approvals.

[Technical_Indicator]

AMD Advanced Micro Devices, Inc The technology company said Monday the U.S. Department of Justice closed its investigation into ATI Technologies' (which AMD had acquired) pricing and marketing practices in the sale of graphics processing units. 3.93 +0.12 / +3.15%

[Technical_Indicator]

AMD Advanced Micro Devices, Inc The maker of personal-computer processors reported a narrower loss in the third quarter. 4.22 +0.10 / +2.43%

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Advanced Micro Devices Inc.'s loss widened in the first quarter as demand and prices for its microprocessors slumped and charges for the biggest restructuring in the company's 40-year history took their toll.

Its shares slipped 5 percent in after-hours trading on disappointing guidance.

AMD reported after the market closed Tuesday that it lost $416 million, or 66 cents per share, in the opening three months of the year. It wasn't as bad as Wall Street projected.

Without one-time charges, the loss would have been 62 cents per share. On that basis, analysts polled by Thomson Reuters expected a loss of 66 cents per share. During the same period last year, AMD lost $364 million, or 60 cents per share.

Sales dropped 21 percent to $1.18 billion, but were still higher than estimates of $978 million.

The Sunnyvale-based company forecast lower second-quarter sales, which likely disappointed investors who were expecting more optimistic guidance -- along the lines of AMD's bigger rival Intel Corp. Last week, Intel projected that its sales would be flat, and Chief Executive Paul Otellini said the personal computer market might have "bottomed out" after its worst stretch in six years.

Analysts were expecting AMD to record $975 million in second-quarter sales, down about 28 percent from the $1.35 billion in revenue from the second quarter of 2008.

The guidance raised questions about whether AMD expects to lose market share to Intel, a prospect that AMD's CEO Dirk Meyer sought to knock down. Intel has about 80 percent of the worldwide market for personal computer microprocessors -- the brains of those machines. AMD has roughly the rest.

"The economy is still weak, making it very difficult to forecast end-user demand," Meyer said on a conference call with analysts, noting that the first and second quarters are typically the weakest for chip makers. "I've heard some say we've hit bottom. I don't know how someone could say we've hit bottom in the current economic climate."

AMD said it sold fewer microprocessors and they commanded lower prices, on average. The average selling prices for server chips was up while notebook chip prices were down, Meyer said. The microprocessor division's sales fell 21 percent to $938 million.

The number of graphics chips sold were also down, but their prices were up. Sales in AMD's graphics division fell 15 percent to $222 million.

AMD has paid dearly to get a foothold in graphics chips: its $5.6 billion acquisition of graphics chip maker ATI Technologies in 2006 saddled AMD with major debt that has contributed to the company's financial woes in recent years.

AMD underwent a major transformation in the first quarter, spinning off its manufacturing arm with the help of the Abu Dhabi government, a move designed to save money. It was also a concession that AMD can't keep pace with Intel in the race to build costly, cutting-edge chip factories.

AMD's latest results included numbers from AMD and the spinoff, which is called GlobalFoundries. Included in the one-time charges are $195 million in restructuring charges and spinoff-related charges.

One closely watched figure that also proved a disappointment was AMD's gross profit margin, which is an important measurement of a company's profitability once the cost of making its products is stripped out. For chip makers, it's especially significant because their back-end costs are so high.

AMD said that its gross profit margin as a standalone company -- excluding GlobalFoundries and minus one-time charges -- was 35 percent of revenue. Ashok Kumar, an analyst with Collins Stewart, said that was about 5 percentage points short of expectations, and combined with AMD's high expenses indicates the company might still have a long way to go to return to profitability.

"Their numbers are so volatile and the business model is in flux -- there's nothing you can hang your hat on," he said.

AMD shares shed 17 cents, or 5.1 percent, to $3.19 in after-hours trading. During the regular session, they gained 5 cents, or 1.5 percent, to close at $3.36.