Can $608 Million Fix AMD’s Problems?

November 17th, 2007 - 7:07 am ICT by admin  

Earlier this week, Intel released its family of 45-nanometer processors, while archrival AMD only recently released a 65-nanometer family of chips. Industry analysts say AMD won’t be able to achieve a 45-nm process until the second half of 2008. That’s the backdrop for the news that the Abu Dhabi government has invested $608 million in AMD.

The deal gives Mubadala Development Co., the government’s strategic investment arm, 49 million newly issued shares, or about 8.1 percent ownership of AMD. The deal does not include a board seat and won’t be subject to review by the U.S. Committee on Foreign Investment.

“This investment strengthens AMD’s ability to deliver customer-centric innovation and choice to the marketplace, creating greater value for all of our shareholders,” AMD Chairman and Chief Executive Hector Ruiz said.

ATI Buy Caused Problems

“AMD is a great fit for Mubadala’s investment approach — a spirited competitor and innovator led by a strong and visionary management team,” said Mubadala CEO and Managing Director Khaldoon Khalifa Al Mubarak. “We see significant opportunities for long-term growth and value creation.”

AMD said it would use the funds for research and development, innovating new products and improving manufacturing quality, which is crucial to AMD’s success in light of the recent issues the company has been facing.

In addition to being eclipsed by Intel’s 45-nm Penryn chips, AMD posted a rough third quarter, with losses of $396 million due in part to its $5.4 billion acquisition of ATI Technologies. While that purchase is eventually expected to yield advantages for AMD, in the short term AMD has trouble stretching its finances to handle it.

Some analysts have called the new financing a Band-Aid. “This solves a relatively short-term problem, but it still doesn’t fix the longer-term problem, which is the need to generate cash faster,” said IDC’s…

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