AMD CEO On The Decision to Spin Off Foundries

Advanced Micro Devices is about to undergo a historic change and spin off its manufacturing facilities into a new company. What remains of the original AMD is now headed by new CEO Dirk Meyer, who spoke to eWEEK on the eve of the deal’s completion. In a nod to AMD’s co-founder Jerry Sander, Meyer said AMD can compete against Intel and other semiconductor companies even as it spins off its fabs into a new company.

When Jerry Sander helped found Advanced Micro Devices, he used the now well-known maxim – “real men have fabs” – to describe how AMD planned to survive in the competitive global semiconductor market.

Now, as AMD prepares to shed it fabs, current CEO Dirk Meyer wants to use a new slogan.

“Jerry was a real smart guy but the industry has changed a lot since that time, so I think, ‘Smart men have foundries,’ is my new quote,” said Meyers during a 26 Feb. interview with eWEEK.

“Clearly it’s going to be a culture change for the company,” Meyer added. “There are a large number of capable manufacturing technologists and manufacturing people who will no longer be part of AMD, but the good news is they get to create a new company. Some people have asked me about the risk – as to imply there are big risks – but honestly I think we are on top of what we have to do both in terms of R&D and supply chain operations.”

In October, AMD announced that it would spin off its manufacturing facilities into a new company temporarily named “The Foundry Company.” After a delay, on 18 Feb., AMD shareholders approved the deal, which includes backing from the Advanced Technology Investment Company of Abu Dhabi, and the deal now is set to close the 2 March

The new management of The Foundry Company, which includes former AMD CEO Hector Ruiz, is expected to announce the official name of the company soon.

By splitting the company in two, AMD’s management is hoping to refocus the company on marketing and chip design, while being able to reduce costs by moving the expensive manufacturing operations to another company. AMD is not the only company to take this approach. Texas Instruments has also spun off its fabs in order to better control costs.

By focusing on chip design and marketing, AMD is hoping to refocus the company as it competes against Intel in the x86 processor market.

While Meyer downplayed the risks involved with splitting AMD into two companies, the move is seen as a way to breathe much needed capital into AMD, which has suffered through two years of poor financial returns. In turn, this had led to a number of layoffs, pay cuts and other cost-cutting measures at AMD.

The spinoff deal means that AMD will gain about $800 million (£568 million) in capital, while removing $1.2 billion (£0.85 million) in debt from the company’s books. Much of that debt comes from AMD’s $5.6 billion (£3.9 million) acquisition of graphics maker ATI. Since the deal closed two years ago, AMD has had to write off millions of dollars in losses and sell off some of ATI’s businesses.