Will AMD Split Into Two Entities?

As reported on Monday by the news site tgdaily, the word is that Advanced Micro Devices (AMD) – might be split into two entities — Asset Light and Asset Smart. One entity will be led by the new CEO Dirk Meyer, who will succeed Hector Ruiz as AMD’s chief executive, and the other one will focus on the development of chip technologies and a manufacturing arm that will take over AMD’s fabs. AMD currently has fabs in Dresden, Germany, and is planning another in Malta, NY.

At this time, there is no official confirmation from the computer processor manufacturing company, in terms of substantiating the news. However, based on indications received from tgdaily sources — there is a strong possibility that an official announcement could be made as early as next month.

Realistically speaking though, this latest development shouldn’t come as a surprise. Rumors concerning the possible spin off of AMD’s manufacturing entities have been around for quite some time now. And for a good reason I might add. After all, competing against a giant co. like Intel is no easy task. Anything less than equal competition – is almost self-destructive, and AMD’s financial difficulties are proof of this. Only last month AMD reported its seventh quarterly loss in a row – while strains on its balance sheet and considerable capital needs remain persistent.

Splitting the company in two different entities, would certainly help the co. with respect to its P&L and create a cash infusion – if AMD sells off its fabs, which could generate anywhere between $2 billion to $3 billion for each. That much needed capital will then help the co. pay off its accumulated debt.

AMD executives have expressed confidence that AMD will achieve an operating profit in the second half of ’08.

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