By Benjamin Pimentel
SAN FRANCISCO (Dow Jones) -- Shares of Advanced Micro Devices
Inc. jumped Tuesday morning after it formally spun-off its
manufacturing facilities into a new company as part of its "asset
smart" strategy.
AMD (AMD) was up more than 6% after the Sunnyvale, Calif.-based
tech giant late Monday said that it had closed the deal with the
Advanced Technology Investment Company and Mubadala Development
Company of Abu Dhabi.
The new company, temporarily called "The Foundry Company," will
be formally launched this week, AMD said.
Under the deal, AMD received $700 million from ATIC for its
ownership interest in the new entity. The new company also assumed
responsibility for the repayment of roughly $1.1 billion of
associated AMD debt.
Mubadala also paid AMD roughly $125 million for 58 million newly
issued AMD shares and warrants for 35 million additional
shares.
AMD shareholders had approved the plan last month. Analysts have
said the deal could help the chip maker deal with mounting
financial woes, although the company still faces major hurdles as
the chip industry reels from a severe downturn.
"We think on one hand 'Asset Smart' bolsters AMD's balance
sheet, improves liquidity, increases manufacturing capacity and
creates additional funds for future CapEx and R&D
expenditures," analyst Betsy Van Hees of Caris & Company said
in a Tuesday note to clients.
"However, on the other hand, meaningful improvement to AMD's
financials remains unclear on a consolidated basis due to our
expectations for 'The Foundry Company' to incur operating losses,"
Van Hees added.