AMD Agrees To Less In Manufacturing Operation Spin-Off

Under the revised deal, ATIC will get a higher stake in the chip manufacturing company, temporarily called the "Foundry Company."

Antone Gonsalves, Contributor

December 8, 2008

2 Min Read

Advanced Micro Devices, which has seen its stock price plummet by half since agreeing to spin off its manufacturing operations in October, said Monday it has agreed to take less in the deal that's seen as pivotal to reversing the company's money-losing operations.

Under the changed deal, Advanced Technology Investment Co., formed by the Abu Dhabi government, would get a higher stake in the joint manufacturing company, temporarily called the "Foundry Company." ATIC's stake would increase to 65.8% from 55.6%, and AMD's share would drop to 34.2% from 44.4%. AMD and ATIC, however, would still have equal voting rights, and ATIC would still pay $2.1 billion for its stake, with $1.4 billion going directly into the joint company and $700 million to AMD.

In announcing the revised deal, AMD also said that Mubadala Development, owned in part by the Abu Dhabi government, would pay less for a bigger investment in AMD. Rather than pay a fixed amount of $314 million to increase its stake in AMD to 19.3% from 8.1%, Mubadala would pay the average closing price per share of AMD stock during the 20 trading days either prior to and including Dec. 12 or the closing date of the transaction, whichever is lower. Under the new deal, Mubadala would still get an additional 58 million shares of AMD stock, but the number of warrants to buy more would increase by 5 million to 35 million.

Over the next five years, ATIC has committed to spending from $3.6 billion to $6 billion to expand and improve the new company's chip-making capacity, which also could be used to make processors for other companies besides AMD. In doing so, the company, which would be headquartered in Silicon Valley, Calif., would become a competitor of a host of manufacturers, many in Asia, that build processors designed by other firms.

The deal, set to close at the beginning of next year, is seen as critical in helping AMD cut costs following a string of quarterly losses that have amounted to several billion dollars. Because of weak demand for its products, which compete with chipmaker Intel, AMD last week slashed its revenue forecast for the fourth quarter. AMD's announcement followed a similar warning from Intel. Both companies sell microprocessors to PC manufacturers.

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