- Company sees fourth-quarter revenue falling more than expected
- Chipmaker says deal is last step in its strategic makeover
Advanced Micro Devices Inc., losing money as it struggles in competition with Intel Corp. in the market for personal-computer processors, said it will get $371 million in cash for the sale of test-and-assembly plants in Asia.
The U.S. company created a joint venture with China’s Nantong Fujitsu Microelectronics Co., providing factories in Penang, Malaysia, and Suzhou, China, in exchange for the cash and a 15 percent stake in the new entity, it said Thursday in a statement.
Underlying the need to make such deals, the struggling chipmaker also predicted that sales in the current quarter will drop about 10 percent from the prior three months, a forecast that fell short of analysts’ estimates. While Chief Executive Officer Lisa Su is trying to remake AMD into a supplier of custom chips for uses outside of personal computers, that declining business still provides the company with the majority of its sales.
Nantong Fujitsu will get 85 percent ownership of the joint venture, which is expected to significantly reduce AMD’s capital expenditure. About 1,700 AMD workers at the two factories will become employees of the joint venture, the companies said.
Fourth-quarter revenue will decrease 10 percent, plus or minus 3 percent, from $1.06 billion in the third quarter, AMD said in the statement. That indicates sales at a midpoint of about $955 million compared with analysts’ average estimate of $998 million, according to data compiled by Bloomberg. Intel on Tuesday forecast a sales gain of about 2 percent in the last three months of the year from the preceding quarter.
Cash and equivalents were $755 million at the end of the third quarter, compared with $829 million three months earlier, reduced primarily by debt interest payments of $69 million, AMD said.
AMD shares, down 26 percent this year, rose 1 percent to $1.97 at the close in New York. They gained about 2.5 percent in extended trading following the announcement.
The Sunnyvale, California-based chipmaker reported a third-quarter net loss of $197 million, or 25 cents a share, compared with a profit of $17 million, or 2 cents, in the period a year earlier.
Reflecting its struggles, on Oct. 1, AMD said it will cut about 500 jobs, or 5 percent of its workforce, as part of a restructuring meant to streamline its business and reduce costs. The company is recording charges of about $42 million for the restructuring plan, which includes outsourcing some information-technology services and application development. The cuts are expected to bring savings of about $2 million and $7 million in the last two quarters of this year, respectively, and savings of about $58 million in 2016, AMD said.
AMD was in talks to sell about a 25 percent stake to private-equity firm Silver Lake Management before the negotiations stalled, people with knowledge of the matter said last month. The two sides, which met over the summer, have put the discussions on hold after failing to agree on a price and strategy, Bloomberg reported Sept 28. AMD also is considering other strategic options, one of the people said.
Global PC shipments fell 7.7 percent in the third quarter, hurt by slower desktop sales and higher dollar-based prices, Gartner Inc. said last week. PC manufacturers shipped 73.7 million units, compared with 79.8 million a year earlier, the market researcher said.