- guardian.co.uk,
- Tuesday October 07 2008 16:57 BST
AMD, the world's second-largest maker of computer processors, has announced radical plans to split its business in half.
In an attempt to slash costs and continue fighting market leader Intel, AMD will spin off its manufacturing arm into a new business, the Foundry Company, with the original company retaining its focus of designing computer chips.
The deal has been made possible by $6bn of capital from two Abu Dhabi-based investment companies. Dirk Meyer, chief executive of AMD, said it would allow the creation of "a financially stronger company with a tightened focus".
"With the Foundry Company, AMD has developed an innovative way to focus our efforts on design while maintaining access to the leading-edge manufacturing technologies that our business needs," said Meyer.
The financial terms of the deal will see Advanced Technology Investment Company (ATIC) and Mubadala Development, both investment arms of the Abu Dhabi government, pump a total $6bn into the two companies.
The new entity will inherit factory setups across the United States and Germany, as well as around 3,000 of AMD's 15,000 strong workforce.
After years of trying to break the dominance of Intel, the major force in the chip industry, AMD remains a distant second in the business of microprocessors — the powerful chips that lie at the heart of a computer.
Recent market downturns have not helped AMD, although it has been struggling for some time.
The company has accused Intel of anti-competitive practices, sparking a series of anti-trust investigations around the world, but it has failed to make significant inroads with PC manufacturers.
Two years ago AMD merged with another leading processor company, ATI, in a deal worth $5.4bn. But that left AMD lumbered with a number of underperforming divisions, and eventually the deal was written down by almost $900m.
That decision was part of the reasoning behind a recent boardroom reshuffle, which saw former chief executive Hector Ruiz moved to the role of chairman. He was replaced by Meyer, formerly the company's chief operating officer.
Under the new plans, which will come into force in 2009 if agreed by shareholders, Ruiz will become chairman of the Foundry Company, while Meyer will continue his role at AMD.
"ATIC and AMD are the ideal partners with which to create the Foundry Company," said Ruiz. "Working together allows us to combine ATIC's long-term vision and patient capital with our manufacturing leadership."
