Even in the state of credit crunch, Chipmaker Advanced Micro Devices proved that there is abundant of capital accessible, if one has growth potential and price appeal.
On Tuesday, AMD saw itself rising on the New York Stock Exchange following the announcement that the company had joined hands with investors in Abu Dhabi in a joint venture dubbed The Foundry.
This deal has been signed with the aim to increase the firm’s finances and facilitate efficiency. Under this deal, AMD will spin off three of its factories, following which it will get a multibillion-dollar cash infusion from one of the Persian Gulf state’s investment vehicles, Advanced Technology Investment.
In spite of the general market decline, investors supported this deal, following which, shares of Sunnyvale, Calif.-based AMD jumped 8.5%, or 36 cents, to close at $4.59, while its larger rival Intel suffered a loss by 5.4%, or 91 cents, to $16.02.
AMD had been suffering losses from past many months and in the last 12 months, its shares have fallen 64.9%. This happened since it could not compete with Intel, which established a strong feet in the microprocessor market. Adding more to its agony, the company also reported seven straight quarterly net losses. Back in July, Chief Executive Hector Ruiz stepped down and was replaced by the firm’s former chief operating officer, Dirk Meyer.
This deal will help the company to recover some of its heavy losses. The company is now planning to clean up its balance sheet and concentrate again on product design. This new foundry will involve all of AMD's manufacturing plants, that would include two in Dresden, Germany and a factory in Saratoga County, New York, which is yet to be built.
Advanced Technology Investment, under this deal, will be investing $2.1 billion in the coming five years, for a stake in Foundry and will further take on about $1.2 billion of AMD's existing debt. Another Abu Dhabi investing entity, Mubadala Development will also will shell out over $314.0 million to more than double its present stake in AMD to 19.3%, from 8.1%.
