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AMD talks more about chipmaking exit strategy

Advanced Micro Devices has options to ease out of manufacturing joint venture.

Advanced Micro Devices talked more about options for reducing its participation in a new manufacturing venture during its third-quarter earnings call on Thursday. The chipmaker also offered more details on conversion to 45-nanometer processors.

AMD 45-nanometer die
AMD 45-nanometer die AMD

Earlier this month, AMD announced that it was splitting into two companies: one for designing chips (AMD), the other for manufacturing them (The Foundry Company). The latter company will be owned approximately 56 percent by Advanced Technology Investment Co. (ATIC) and 44 percent by AMD.

During the conference call, AMD Chief Financial Officer Bob Rivet responded to a question from an analyst about an "exit strategy" for the foundry (manufacturing) side of the business by saying that AMD will "turn in more shares and ownership of the company" if necessary.

As Rivet put it, the foundry deal provides that "when a capital call is required for the foundry business, it allows us to either pay our fair share of that capital call or turn in more shares and ownership of the company...We'll make that determination at each point in time...There's a natural way to get out of it if we want to."

All of this--whether accounting is done on a consolidated or nonconsolidated basis--can get a little confusing for nonaccountants (and AMD even volunteered that it's "confusing") but Rivet put it this way. "Think of it this way: The Foundry Company piece of the bucket will have profits and losses...but they're all cashless. The cash generating machine of AMD is the AMD design product (company)."

Both Rivet and CEO Dirk Meyer also discussed AMD's conversion to 45-nanometer chips. "We'll be fully converted in first half of next year," said Meyer. Rivet added that it will be a "very fast ramp" to 45 nanometer chips. AMD is currently shipping processors based on 65-nanometer technology. Smaller geometries typically result in faster processors that use less power.

Speaking about AMD's 45-nanometer Shanghai server processor, Meyer said, "You'll see OEM (server) systems in the market this quarter," and added that AMD is "shipping the desktop variant this quarter and you'll see OEM systems in the market early next quarter."

Responding to a question about AMD's Netbook chip strategy and its response to Intel's Atom processor, Meyer said: "Clearly the Netbook is a new form factor and new market opportunity and one we're not participating in right now, today."

He said more details will come at an upcoming analyst meeting. "We do have strategies together with our OEMs for pushing solutions both down into smaller form factors and lower notebook price points."