By Antone Gonsalves
InformationWeek
October 7, 2008 01:30 PM
Advanced Micro Devices (NYSE: AMD) on Tuesday announced that it would spin off its manufacturing operations into a new company, a breakup that the chipmaker hopes will reverse a string of money-losing quarters and dramatically improve its ability to compete with rival Intel (NSDQ: INTC).
AMD would hold a minority stake, 44.4%, in the new company, temporarily called the Foundry Co. The Advanced Technology Investment Co., formed by the Abu Dhabi government, would hold the remaining 55.6%. AMD, however, would have equal voting rights with ATIC, since the company board would be equally divided between the two companies.
The deal is expected to help AMD meet its critical need to reduce costs following a string of quarterly losses that have amounted to several billion dollars. Along with sharing control over manufacturing facilities with AMD, ATIC would pay the billions of dollars needed to continue with plans to expand AMD's fabrication facilities in Dresden, Germany, and build a new fab near Albany, N.Y., which would employ more than 1,400 people. AMD's Austin, Texas, manufacturing operations also would be turned over to ATIC, which would be headquartered in Silicon Valley.
Under the deal, ATIC would pay $2.1 billion for its stake in the new company, with $700 million of that money going to AMD to purchase its share. In addition, the new entity would take over $1.2 billion in AMD debt.
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