AMD shareholders approve spin-off plan

[informal]

Just in (http://www.marketwatch.com/News/Story/Story.aspx?guid={5B4ACAB9-1D4C-49A1-B64C-91C612784603}&siteid=yhoof2):

AMD shareholders approve spin-off plan
By Benjamin Pimentel
Last update: 11:20 a.m. EST Feb. 18, 2009
SAN FRANCISCO (MarketWatch) - Advanced Micro Devices Inc.


11:15am 02/18/2009

SAN FRANCISCO (MarketWatch) - Advanced Micro Devices Inc. on Wednesday said the company's shareholders have approved a proposal to spin off its manufacturing facilities to form The Foundry Co. in a joint venture with Abu Dhabi's Advanced Technology Investment Co. The Sunnyvale, Calif.-based chip maker had failed to meet the required 50% quorum last week. The transaction is expected to close on March 2

As expected the deal got the approval from shareholders.

[Indes]

Sorry for being daft but what exactly does this mean for AMD?

[SKYMTL]

There is still the "little" hurdle of retaining the x86 licensing from Intel

[onewingedangel]

Whilst Intel may have a legal right to withold an x86 licence from the new company, AMD are betting on Intel not enforcing that right.

It isn't as though Intel could stop AMD from making x86 processors, as that would open them up for monopoly intervention - but it certainly allows some renegotiation -most likely to come to favourable terms in settling lawsuits, in return to extending the cross licencing agreement to the new company.

[freeloader]

Whilst Intel may have a legal right to withold an x86 licence from the new company, AMD are betting on Intel not enforcing that right.

It isn't as though Intel could stop AMD from making x86 processors, as that would open them up for monopoly intervention - but it certainly allows some renegotiation -most likely to come to favourable terms in settling lawsuits, in return to extending the cross licencing agreement to the new company.

Don't mention "Intel" and "monopoly" around here, some people will think you're crazy when you even mention that word. :shrug:

[Donnie27]

Don't mention "Intel" and "monopoly" around here, some people will think you're crazy when you even mention that word. :shrug:

So what do you think of this?


Whilst Intel may have a legal right to withold an x86 licence from the new company, AMD are betting on Intel not enforcing that right.

It isn't as though Intel could stop AMD from making x86 processors, as that would open them up for monopoly intervention - but it certainly allows some renegotiation -most likely to come to favourable terms in settling lawsuits, in return to extending the cross licencing agreement to the new company.

Yepp, Intel will have to avoid trying to cut off a X86 license as long as AMD has ties to the ATIC and they still do(have ties). This isn't much different than AMD's seperate deal with TSMC, I thought.

See freeloader, people might disagree about the license but it will be hard to squeese in bashing and flamebaiting out of this one.:up:

[freeloader]

So what do you think of this?



Yepp, Intel will have to avoid trying to cut off a X86 license as long as AMD has ties to the ATIC and they still do(have ties). This isn't much different than AMD's seperate deal with TSMC, I thought.

See freeloader, people might disagree about the license but it will be hard to squeese in bashing and flamebaiting out of this one.:up:

I think if Intel were to refuse or attempt to negotiate in bad faith, a new X86 agreement, then that would be the true signs of a monopolistic mega corporation.

[Donnie27]

I think if Intel were to refuse or attempt to negotiate in bad faith, a new X86 agreement, then that would be the true signs of a monopolistic mega corporation.

Believe it or not, I agree 100%:up:

[cal_guy]

There is still the "little" hurdle of retaining the x86 licensing from Intel

There is no problem with licensing as the new joint venture follows the Intel AMD cross-licensing agreement's definiton of subsidary to the letter.

1) " owns or controls (either directly or indirectly) or originally
contributed (either directly or indirectly) at least fifty
percent (50%) of the tangible and intangible assets of such
entity; and "

AMD contributed $1.8 billion worth of assets to the new venture while ATIC contributed $1.4 billion. In addition $1.2 billion in debt will be transfered to the the new entity which is why AMD only has 34.2% of the new entity.

2) " if such entity has voting shares or other securities, at
least fifty percent (50%) of the outstanding shares or
securities entitled to vote for the election of
directors or similar managing authority and such entity
is under no obligation (contractual or otherwise) to
directly or indirectly distribute more than seventy
percent (70%) of its profits to a third party, "

AMD fulfills this because AMD is entitled to vote for 50% of the board of directors. The second part depends on the agreement between ATIC and AMD, it may be contigent on AMD mantaining over 30% share of the entity or ATIC may have agreed to limit their maximum profits to 70%.

[Shintai]

There is no problem with licensing as the new joint venture follows the Intel AMD cross-licensing agreement's definiton of subsidary to the letter.

1) " owns or controls (either directly or indirectly) or originally
contributed (either directly or indirectly) at least fifty
percent (50%) of the tangible and intangible assets of such
entity; and "

AMD contributed $1.8 billion worth of assets to the new venture while ATIC contributed $1.4 billion. In addition $1.2 billion in debt will be transfered to the the new entity which is why AMD only has 34.2% of the new entity.

2) " if such entity has voting shares or other securities, at
least fifty percent (50%) of the outstanding shares or
securities entitled to vote for the election of
directors or similar managing authority and such entity
is under no obligation (contractual or otherwise) to
directly or indirectly distribute more than seventy
percent (70%) of its profits to a third party, "

AMD fulfills this because AMD is entitled to vote for 50% of the board of directors. The second part depends on the agreement between ATIC and AMD, it may be contigent on AMD mantaining over 30% share of the entity or ATIC may have agreed to limit their maximum profits to 70%.

Unless AMD invest billions(They aint) then ATICs share will grow alot over the next years. AMD might go below 30% even this year. The more ATIC invest the less share AMD got. Unless it also invest..and its obviously they dont since they have nothing to invest with.

Its also just a matter of time before AMD loses the voting rights to ATIC. Its simply a slow transfer of the fabs and company to ATIC to hope for avoidance with Intels legal arms. AMD is selling its lifeblood to survieve. They are fabless and has to share profit.

AMD fails on number 1 that you write. And AMD is close (but not yet) to fail on number 2.
Its a no brainer that the shareholders would accept. AMD would lack enough cash for operation after Q1 or at best Q2. It would be GM/Chrysler all over.

[Donnie27]

Unless AMD invest billions(They aint) then ATICs share will grow alot over the next years. AMD might go below 30% even this year. The more ATIC invest the less share AMD got. Unless it also invest..and its obviously they dont since they have nothing to invest with.

Its also just a matter of time before AMD loses the voting rights to ATIC. Its simply a slow transfer of the fabs and company to ATIC to hope for avoidance with Intels legal arms. AMD is selling its lifeblood to survieve. They are fabless and has to share profit.

AMD fails on number 1 that you write. And AMD is close (but not yet) to fail on number 2.
Its a no brainer that the shareholders would accept. AMD would lack enough cash for operation after Q1 or at best Q2. It would be GM/Chrysler all over.

One Tiny Problem. There not enough left of AMD for the US Government to bail out as they're doing with GM and Chrysler.

Japan based Toyota, who lost money for the first time, has a better chance of getting US dollars than AMD:rofl: They hire more American workers than AMD.

[Chad Boga]

I think if Intel were to refuse or attempt to negotiate in bad faith, a new X86 agreement, then that would be the true signs of a monopolistic mega corporation.
If AMD has breached the terms of the licensing agreement and this allows Intel to refuse to agree to a new x86 agreement, then I don't see that the regulators would intervene here.

However from that point onwards, if Intel's behaviour were deemed to be of the sort that the Feds don't like to see from monopolies, then one would think they could face some dire consequences.

Remember that becoming a monopoly isn't illegal or guaranteed to see you be messed with by the Feds, it is only if you don't behaviour yourself once you have reached monopoly status.

[cal_guy]

Unless AMD invest billions(They aint) then ATICs share will grow alot over the next years. AMD might go below 30% even this year. The more ATIC invest the less share AMD got. Unless it also invest..and its obviously they dont since they have nothing to invest with.

Its also just a matter of time before AMD loses the voting rights to ATIC. Its simply a slow transfer of the fabs and company to ATIC to hope for avoidance with Intels legal arms. AMD is selling its lifeblood to survieve. They are fabless and has to share profit.

AMD fails on number 1 that you write. And AMD is close (but not yet) to fail on number 2.
Its a no brainer that the shareholders would accept. AMD would lack enough cash for operation after Q1 or at best Q2. It would be GM/Chrysler all over.

1) "The Board of Directors of The Foundry Company will be equally divided between representatives of AMD and ATIC."
Voting rights != to Equity share
Pg 1 http://web.amd.com/newglobalfoundry/backgrounder.pdf

2)You can rest assure that AMD will not fall below 30% in the near future as the Foundry Co. will have to rely on AMD orders and that is contingent on AMD maintaining the cross-licensing agreement. There may even be a clause ine the Joint Venture agreement that limits each party to a minimum of 30% profit. Also as part of the deal AMD receive a further $700 million investment from ATIC that will used to acquire additional shares of Foundry Co.

In total this deal adds $1.6 billion to AMD balance sheet and AMD survival is assured for at least 3 years.

[Shintai]

1) "The Board of Directors of The Foundry Company will be equally divided between representatives of AMD and ATIC."
Voting rights != to Equity share
Pg 1 http://web.amd.com/newglobalfoundry/backgrounder.pdf

2)You can rest assure that AMD will not fall below 30% in the near future as the Foundry Co. will have to rely on AMD orders and that is contingent on AMD maintaining the cross-licensing agreement. There may even be a clause ine the Joint Venture agreement that limits each party to a minimum of 30% profit. Also as part of the deal AMD receive a further $700 million investment from ATIC that will used to acquire additional shares of Foundry Co.

In total this deal adds $1.6 billion to AMD balance sheet and AMD survival is assured for at least 3 years.

I dont think you understand how it goes. ATIC will invest 4.8-6billion the next 5 years in the fabs. Each time ATIC invest 1$ and AMD invest 0$ ATIC gains share. Thats how the contract is. AMD is incapable of investing any money for a good forseeable future. And its only a matter of time before AMD gets kicked or bought out of the rest.


ATIC’s economic ownership will increase over time based on the differences in securities held by
AMD and ATIC, and depending on whether AMD elects to invest proportionately with ATIC in future
capital infusions to support The Foundry Company’s growth;

AMD "only" got 700million, not 1.6billion. And since they lost the fabs their liability is lower. Plus AMD in Q4 lost around 430million on CPUs alone. How much you think they gonna lose in Q1 if you remove this paint?

Plus each time AMD makes a CPU now. They will lose even more of the profit from it. Ofcourse they also dont have to worry about the fabs anymore. But they also have to pay to get the CPUs made.

[cal_guy]

I dont think you understand how it goes. ATIC will invest 4.8-6billion the next 5 years in the fabs. Each time ATIC invest 1$ and AMD invest 0$ ATIC gains share. Thats how the contract is. AMD is incapable of investing any money for a good forseeable future. And its only a matter of time before AMD gets kicked or bought out of the rest.


AMD 0 billion X price per share X 0 votes per share = 0 additional votes
ATIC 4.8 billion X price per share X 0 votes per share = 0 additonal votes

Since you didn't read this the first time

EQUITY != Voting Rights



AMD "only" got 700million, not 1.6billion. And since they lost the fabs their liability is lower. Plus AMD in Q4 lost around 430million on CPUs alone. How much you think they gonna lose in Q1 if you remove this paint?



AMD owns 35.4% of Foundry Co. has an enterprise value of 4.4 billion of which AMD owns 35.4% which makes 1.56 billion. AMD contributed 1.8 billion in assets and 1.2 billion debt for a net of 600 million. So 950 million added.



Plus each time AMD makes a CPU now. They will lose even more of the profit from it. Ofcourse they also dont have to worry about the fabs anymore. But they also have to pay to get the CPUs made.

Because with additional capital you grow the pot so that even through the per unit profit is decreased the total profit that you receive is greater. It's the reason for things like public corporations and venture capital. In the short term AMD is reducing their fixed costs and potentially increasing their variable costs. This will improve AMD ability to run profitably with lower volume while also offloading some risk to a third-party.

[freeloader]

If AMD has breached the terms of the licensing agreement and this allows Intel to refuse to agree to a new x86 agreement, then I don't see that the regulators would intervene here.

However from that point onwards, if Intel's behaviour were deemed to be of the sort that the Feds don't like to see from monopolies, then one would think they could face some dire consequences.

Remember that becoming a monopoly isn't illegal or guaranteed to see you be messed with by the Feds, it is only if you don't behaviour yourself once you have reached monopoly status.

And Intel's behaviour overseas just goes to show what they're capable of. Anyhow, I don't want to start any type of verbal war, so I'll leave it at that; besides, Intel hasn't done anything yet to warrant anyone's opinion on the licensing issue. Let's all take the "wait and see" approach. :D