2nd UPDATE: AMD Fails To Reach Quorum For Vote On Spinoff
February 10 2009 - 1:09PM
Dow Jones News
Advanced Micro Devices Inc. (AMD) failed Tuesday to gain enough
shareholder votes to approve the spinoff of its manufacturing
operations, delaying the process until next week as it waits for
more investors to respond.
AMD shares were recently down 8.1% to $2.17. The stock is down
more than 28% over the past three months as sales of computer chips
have rapidly deteriorated amid sharp drops in spending from
consumers and businesses, lowering hopes AMD will return to
profitability this year.
The Sunnyvale, Calif., company, which competes almost
exclusively with chip giant Intel Corp. (INTC), has touted a
spinoff of its capital intensive chip production business as a
defining move to re-invent the company and focus primarily on chip
design. While most expect the deal will be approved, the failure to
reach a quorum could raise questions about management's handling of
the process and its ability to return the company to profitability
after nine consecutive quarterly losses.
The company received responses from 42% of eligible voters, said
AMD general counsel Harry Wolin. AMD needs to hear back from a
majority of stockholders to approve the deal in which it will spin
off the chip production side of the business into a new venture,
known as The Foundry Company.
The new business will be jointly owned by AMD and the Advanced
Technology Investment Co., an investment entity associated with the
government of Abu Dhabi.
The shareholder meeting was adjourned until Feb. 18 to give more
time for investors to vote for the measure.
"We had set an aggressive schedule for the shareholder meeting.
In retrospect, it was maybe too aggressive, and we need a little
more time for stockholders to participate in the vote," said AMD
spokesman Drew Prairie.
"It's just a delay, and a delay that could consequently push out
the closing date of the venture," said Caris & Co. analyst
Betsy Van Hees. While she expects the deal to be approved next
week, she said the situation still doesn't bode well for AMD.
"We were largely expecting this to be just a formality, so this
does certainly give us increasing cause for concern," she said.
A shareholder vote is the last major requirement before AMD can
close the deal, Prairie said. He also noted that of the votes
received, 97% have been in favor of the spinoff.
Along with being the first step in separating the capital
intensive manufacturing operations from what has recently been a
strong product lineup, the deal should provide a boost to AMD's
balance sheet.
The arrangement, which also includes an investment from Abu
Dhabi's Mubadala Development Co., would provide about $800 million
in cash and move $1.2 billion in debt to the new company.
The cash is certainly needed. In January, AMD reported a $1.42
billion fourth-quarter loss, hurt by the drops in computer sales
and big write-offs. In 2008, AMD burned through roughly $800
million in cash reserves.
-By Jerry A. DiColo; Dow Jones Newswires; 201-938-5670;
jerry.dicolo@dowjones.com