AMD wins $608mn cash infusion from Abu Dhabi's Mubadala

Advanced Micro Devices (AMD), the leading global provider of innovative microprocessor solutions for computing, communications and consumer electronics markets, announced Friday that Abu Dhabi government’s investment arm has agreed to pay $622 million to take up company’s 8.1 per cent stake.

Mubadala Development Co., the Abu Dhabi state-backed investment fund, bought an 8.1% stake in the Sunnyvale, California based-AMD, in a deal that includes a $622 million cash infusion for AMD in exchange for about 49 million company shares.

Under the terms of the deal, Mubadala will receive 49 million newly issued AMD shares at $12.70, the closing price of AMD common stock on Nov. 15.

Mubadala’s investment in AMD, which makes the Persian Gulf Emirate one of the chip making company's largest shareholders, comes at the time when the US chip-maker is making strenuous efforts to simmer down costs while concentrating attention on its research and development efforts.

AMD has faced a cash shortage since it bought top graphics chip maker ATI Technologies Inc. AMD, the designer, manufacturer and marketer of industry-standard digital integrated circuits (ICs), had acquired ATI last year in July for $ 5.4 billion in cash and stock to expand its product mix and grow market share as it battles Intel Corp.

“We proudly welcome Mubadala, a world-class investor, to the AMD shareholder family. This investment strengthens AMD’s ability to deliver customer-centric innovation and choice to the marketplace, creating greater value for all of our shareholders,” Hector Ruiz, the chip maker’s chairman and chief executive, said in a statement.

The investment, however, is valued at $622 million, but AMD received only $608 million in the deal. The remainder $14.6 million went back to Mubadala as reimbursement for expenses. AMD intends to use the amount for research and development, product innovation, and manufacturing improvements

Mubadala’s recent purchase of AMD stake is its second after it bought a 7.5 percent stake in the Carlyle Group, a private equity firm that invests in aerospace, defense and the high-tech industries, and has been increasingly making investments in the semiconductor province.

On their recent move, Mubadala’s Chief Executive and Managing Director, Khaldoon Khalifa al-Mubarak said, “AMD is a great fit for Mubadala’s investment approach,” further adding that “We see significant opportunities for long-term growth and value creation.”

Advanced Micro Devices is the world's second-largest maker of personal-computer processors, behind Intel. The company was founded in 1969 by a group of former executives from Fairchild Semiconductor, including Jerry Sanders III, Ed Turney, John Carey, Sven Simonsen, Jack Gifford and three members from Gifford's team, Frank Botte, Jim Giles and Larry Stenger.

AMD is also the world's second-largest supplier of x86 based processors, the largest supplier of discrete graphics products as a result of the merger with ATI Technologies in 2006, and owns a 37 percent share of Spansion, a supplier of non-volatile flash memory.

Intel, which has lost more than 5 percent (as of January 2007) of the overall computer chip market to its archrival AMD, is still the world's largest computer chip maker. It began losing the market share several years ago as customers began attracted to AMD-designed chips that were seen as more energy-efficient.

AMD and Intel have been in this constant attempt to out run each other and grab the monster share of the processor market.

AMD last month reported a third quarter loss of $396 million or 71 cents a share, on revenue of $1.63 billion, due to rising costs from a year ago. However, its third-quarter market share in terms of shipments rose 0.4% over the previous quarter to 23.5%. In contrast, Intel plunged by an equal amount to 76.3%, indicating clearly that the rivals went head-to-head to a standstill during the three-month period, according to the market research firm IDC.