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AMD borrows $300m to fill war chest

Time to buy Calxeda or Applied Micro

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Advanced Micro Devices is wading into the debt markets to raise money for a whole bunch of things it needs to get done.

The chip maker designer and peddler said in a statement that it would be making a private offering of $300m in senior notes due in 2022, and that it had a number of potential uses for the funds.

Four, to be specific, and two of the options are boring (but necessary) bean counting. The first is to possibly repay all or some of its 5.75 per cent convertible senior notes that are due this month, or to prepay some similar 6 per cent notes that come due in 2015.

At the moment, according to a filing with the US Securities and Exchange Commission, AMD has $485m in short-term debt and $1.51bn in long-term debt – both excluding capital leases. The company also has just over $1bn in cash and another $564m in securities, so if you do the math, it is only in the hole to the tune of $418m.

AMD also said that it might use some of the dough it gets from the debt market to make cash payments to its wafer baker and former fab, GlobalFoundries, under a revised chip production agreement that AMD made with GlobalFoundries back in March.

GlobalFoundries has had troubles with its 32 nanometer process ramp for Opteron server processors and with its 28 nanometer ramp for Fusion hybrid CPU-GPU chips, and it was driving AMD nuts. So in March, to help GlobalFoundries focus a little, AMD transferred its 1.06 million shares in the fab, then worth $278m, to ATIC, the company from Abu Dhabi that controls the wafer baker, in return for allowing AMD to wiggle out of its exclusive five-year deal to make certain 28 nanometer chips. A

MD has said it has no intention right now of dual-sourcing chips – quite frankly, its other 28 nanometer partner, Taiwan Semiconductor Manufacturing Corp, has its own 28 nanometer ramp issues – but at least now it has the option. That waiver cost AMD $425m, which is to be paid in cash over two years.

The Texan rival to Intel in the x86 processor market and to Nvidia in graphics processors also said that it might use the funds raised in the debt offering to do some acquisitions. It shelled out $334m back in February to buy microserver and interconnect upstart SeaMicro, which is going to be the foundation of a revised server business for AMD over the next couple of years in the hosting, big data, and supercomputing arenas where low-power and integration are vital.

It is hard to imagine what AMD might buy, but there are plenty of options. Many of the more interesting ones would cost a lot more than $300m, however. AMD could buy Calxeda, the upstart ARM server processor maker, and as much for the distributed Layer 2 switch it has integrated on its EnergyCore ARMv7 generation processors.

Applied Micro Circuits, which is working on a multi-core, 64-bit ARMv8 processor for servers called X-Gene, announced last fall and due to sample this year, is another obvious disruptive acquisition that AMD could make.

Applied Micro is already public and already sells embedded processors and communications chips that are doing somewhere around $230m a year in revenue. The company has $96.1m in the bank right now, too, and a market cap that is around $366m as El Reg goes to press.

So AMD might be able to pick it up for a half billion dollars or so if it wants to expand its embedded processor biz and also move aggressively into ARM processors for servers and other kinds of devices. ®

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