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AMD stocks soar following Asset Smart fab spin-off

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Posted October 8, 2008 by admin in Industry

AMD’s decision to split into a chip-designing company and a chip-making company should help return the company to profitability sooner, said several analysts who watch the chip-making industry. AMD would remain as the chip-designing company, while the new company, tentatively called The Foundry Co., would focus on chip-making under the plan, unveiled Tuesday.

“I think this is a good move for AMD, especially in the current financial environment,” said Dean McCarron, principal analyst for Mercury Research. “It frees AMD of the heavy-debt burden of owning a fab and lets it focus on its primary microprocessor and graphics businesses.”

The move should allow AMD to return to profitability much faster than if it kept its foundry business, and it allows AMD to stop worrying about under-use of factories during economic downturns, McCarron added.

But the move is not without risks, added Jack Gold, founder and principal analyst at J.Gold Associates. The Foundry Co., despite a huge investment from the Advanced Technology Investment Company (ATIC), faces a competitive marketplace, Gold said. ATIC is a company set up by the government of Abu Dhabi to invest in tech companies worldwide. It will invest US$1.4 billion directly in The Foundry Co. and pay another $700 million to AMD, giving it 55.6 percent of the new company. AMD will own the rest of the company.



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