AMD confirms break-up plans

Chip fabs will be spun off into a separate manufacturing business, with AMD concentrating on chip design.

AMD's Dresden Fab

Embattled chipmaker AMD has confirmed earlier reports that it will sell off its chip manufacturing facilities and refocus the company on design and development.

The plan, confirmed in a conference call with journalists at the start of share trading in New York, involves Advanced Technology Investment Company (ATIC), an Abu Dhabi state-owned venture capital company, investing at least $5.7 billion (3.16 billion) in a new business that will own AMD's manufacturing facilities, including its European fab in Dresden (pictured). In return ATIC will get a 55 per cent stake and half the board seats in the new firm provisionally called Foundry Company - while AMD will own the rest.

Foundry Company will not only manufacture chips designed by AMD, but will also take on business from other companies looking to manufacture volume processors and other microchips.

The new venture will assume all $1.2 billion (666 millon) of debt associated with AMD's manufacturing operations.

Another Abu Dhabi government company, Mubadala Development, will spend $314 million (174 million) to increase its stake in AMD to 19.3 per cent from 8.1 per cent. In doing so, it will gain a seat on AMD's board, AMD confirmed.

"Today is a landmark day for AMD, creating a financially stronger company with a tightened focus," said Dirk Meyer, chief executive of AMD.

ATIC will invest an initial $2.1 billion (1,16 billion) in the manufacturing business, with $700 million (388 million) going directly to AMD and thus providing a much needed cash injection into the main company at a time when it is struggling to compete with main rival Intel. After that, it will invest an additional $3.6 billion (2 billion) to $6 billion (3.33 billion) over the next five years.

As reported earlier, the deal is expected to close at the end of 2008 or early in 2009, pending shareholder approval and regulatory clearance.

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