AMD Finds Its Sugar Daddy

AMD is expected to announce its new ownership order this morning.

The conference call is due to start at 8am EDT (12:00 GMT), and you can register to hear it here.  

The best article with the most details about the deal can be found here.

It says:

1. The new company will take over AMD’s fabs.  An Abu Dhabi investment firm called ATIC will own 55% of the new company, AMD will retain the rest. 

2. The new company will give AMD $700 million and take over $1.2 billion in AMD debt. 

3. Much more importantly for AMD, it will build the New York State fab (provided NYS agrees to the transfer of subsidies to this new company, which should not be a problem).  It will also do some upgrading at Dresden later.  They plan to spend between 3.6-6 billion to do so.   Given the wide range of possibile investment, my best guess is that they’re committing to a building the NYS fab now, upgrade Fab36 later, and decide whether or not to redo Fab30 depending on future circumstances.  Update: After seeing some other articles, look like Fab30 will get the work first.

4.The Mubadala folks who bought 8% of AMD last year are coming back for more. They’ll buy 58 million new shares, which will get their ownership up to 16%, and will buy warrants for the option to buy another 30 million shares, which would get its ownership close to 20%. 

5. Hector Ruiz will be the chairman (though not CEO) of the new company and will convert to Islam as part of the deal. 

No, I made up the part about Hector converting to Islam, I think.  

He has good reason to say to himself, “Allah is merciful,” though. In the short-term, this is an incredibly sweetheart deal, especially given the current financial tumult and extremely likelihood of a severe global recession for the next few years.  Bottom line is: this saves the company for the next few years.   They’ll get to live and fight another day.  This company will live to see 32nm.  This company will live to see its litigation against Intel through. 

This is not to say AMD is now going to live happily ever after, and we’ll talk about the long-term problems likely to emerge from this deal tomorrow.  But AMD essentially had a big financial tumor cut out from it today.  The surgical recovery and followup chemo and radiation treatment may well be unpleasant, and the tumor might come back in a few years, but given what would have happened if nothing was done, both AMD and its fans have every reason to be grateful to the doctor.    

Ed