The world's number two microprocessor maker, Advanced Micro Devices Inc., is splitting into two in order to shore up its financial position and to better compete with its main rival, Intel Corp.
The Sunnyvale, Calif.-based company announced on Tuesday that it was spinning off its manufacturing operations into a new company called Foundry Co., a joint venture with Advanced Technology Investment Co., an entity backed by the Persian Gulf state of Abu Dhabi.
Advanced Technology Investment will pay $2.1 billion US for its stake in Foundry and will also assume $1.2 billion of AMD's existing debt. The company also plans to invest another $3.6 billion US and $6 billion US in Foundry over the next five years to expand its chip-making capability, which will include a new plant in New York State.
AMD will control 44.4 per cent of the company while Advanced Technology Investment will control 55.6 per cent. AMD senior vice-president Doug Grose will become chief executive officer of Foundry.
Once the spinoff is complete, AMD will focus on design and development of chips, similar to how "fabless" companies such as Nvidia Corp. work.
Abu Dhabi's investment company, Mubadala Development Co., will also double its current stake in AMD to 19.3 per cent with a new investment of $314 million.
The deal, which will require regulatory approval, is expected to close in the beginning of 2009.
AMD has been hurting since it acquired Markham, Ont.-based graphics chip maker ATI Technologies in 2006 for $5.4 billion US. As part of the deal, AMD acquired ATI's cellphone and television divisions, both of which were underperforming. AMD ended up writing down the value of its acquisition by $876 million US.
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