AMD to spin off manufacturing
Advanced Micro Devices will reveal a broad cost-cutting plan this morning that includes spinning off its manufacturing operations to a new joint venture largely funded by Abu Dhabi investment companies. It's a bold move for the chipmaker as it tries to maintain its position as the only real rival to Intel.
According to a report in the New York Times, the company was struggling to come up with the billions of dollars needed to construct state-of-the-art chip plants needed to build the smaller, faster and more energy-efficient chips that compete with Intel's.
The Times, which got advance details about an AMD advisory issued late Monday, lays out the terms of the deal:
- Two Abu Dhabi firms invest $6 billion to finance a new factory near Albany, NY and to upgrade an existing plant in Germany.
- AMD will own 44 percent of the new joint venture, called Foundry Company. The investment company, called Advanced Technology, will own the remainder.
- Advanced Technology, formed by the Abu Dhabi government, and AMD will have equal voting rights for the Foundry Company.
- Abu Dhabi's Mubadala Development Company, which bought 8 percent of AMD in November, will pay $314 million for 58 million newly issued shares, increasing its stake in the pre-split company to 19.3 percent.
The transaction needs approval from shareholders, as well as regulators in the U.S. and Germany. The companies expect the deal to close early next year. AMD closed Monday at $4.23 a share.