Advanced Micro Devices will take more than $900 million in financial charges in the 2008 second quarter as the chip maker continues to struggle under the weight of its acquisition of ATI.
Advanced Micro Devices is looking to shoulder more than $900 million in
charges related to its acquisition of ATI
when it announces its second-quarter financial results July 17.
In a filing with the U.S. Securities
and Exchange Commission July 11,
disclosed that would it take an $880 million charge that related to the
Consumer Electronics division of ATI. In the
letter, AMD specifically referred to that
division's handheld and digital television units as significantly underperforming.
will also take a $32 million writedown related to the layoffs
maker announced earlier in 2008. Finally, the company is taking a $36 million
hit due to some of its investments, including its investment in Spansion, which
develops flash memory.
In the SEC filing, AMD said it plans to
offset these costs by selling some of its 200-millimeter wafer equipment from
its fabs for a total of $190 million. However, AMD
did not detail if it plans to close its fabs or develop more manufacturing
partnerships as part of its "asset smart" strategy.
Ross Seymore, an analyst with Deutsche Bank, wrote that the numbers AMD
detailed in the filing are significant but will not change the company's
overall financial fundamentals.
"AMD is taking several one-time
charges, but we believe they do little to change the fundamentals of the
company," Seymore wrote in the research note. "AMD
will take an additional $880 million impairment charge related to the ATI
acquisition. This brings the total impairment charges related to ATI
to approximately $2.2 billion or more than 40 percent of the original $5.4
billion acquisition price."
In 2006, AMD completed its over-$5
billion deal for ATI. After that
announcement, AMD began formulating
significant plans for the graphics technology that ATI
would bring into the company. In the coming years, AMD
plans to combine CPUs and GPUs (graphics processing units) within the same
piece of silicon, which the
chip maker calls Accelerated Computing.
has been struggling with the debt it created by buying ATI
ongoing financial losses are directly related to the acquisition.
has led to AMD announcing that it would eliminate 10 percent of its
16,500-person work force
and eventually target those parts of its business
that it believes are underperforming. With the July 11 SEC filing, it seems clear
that ATI Consumer Electronics division will be spun off into a new business or
sold to another company.
Even with its financial issues, AMD
has managed to gain back some market share in terms of revenue,
to iSuppli. Those
gains can be traced back to company finally delivering its quad-core Opteron
into the market for desktops, servers and workstations.
also launched Puma, its new mobile platform for laptops,
in June, which
should allow the company to target small and midsize business customers as well
as back-to-school sales. Later in 2008, AMD
will roll out the first of its 45-nanometer processors
-"Shanghai"-which will allow AMD to place more processors
on each wafer, which should help reduce costs.