Feeds

AMD bites bullet, slashes chip orders

Downside: hefty penalty. Upside: leaner inventory

Build a business case: developing custom apps

The slumping PC market has put the hurt on AMD to the extent that the struggling chipmaker has sharply reduced its Wafer Supply Agreement (WSA) with its chip-baking partner, GlobalFoundries.

AMD estimates that it will purchase $115m worth of wafers from GlobalFoundries this quarter under the amended WSA. The previous agreement between AMD and the company, which it spun off in a deal with the Abu Dhabi–based investment firm ATIC in 2009, had been for $500m worth of chips.

A change of that magnitude will cost AMD a pretty-penny penalty. As part of the amended WSA, AMD will pay GlobalFoundries a "termination payment" of $320m, with $80m to be paid by the end of this year, $40m by the first of April, and a $200m promissory note due to GlobalFoundries by the end of 2013.

As might be expected, AMD CEO Rory Read put the best possible spin on the news. "Today's announcement demonstrates that the long-term strategic partnership between AMD and GlobalFoundries continues to benefit both companies," he said in a statement released when the announcement was made, after the markets closed on Thursday.

Speaking of markets, AMD's stock price was hovering around $2.35 per share as we clicked Publish on this article, well below its 52-week closing high of $8.25, which it hit in March of this year. That said, $2.35 is a good bit better than AMD's lowest close of the past year, which was $1.88 on the Monday after this Thanksgiving.

Despite the news of the amended WSA and the termination payment, don't think that AMD is getting ready to fold up its tent and trudge into history. As part of the new agreement, for example, the company has committed to buying $250m worth of chips from GlobalFoundries in the first quarter of next year, and estimates that its 2013 purchases will total $1.15bn.

AMD also notes that as it standardizes on 28-nanometer chip technology from GlobalFoundries, it will reduce the amount of research and development funds that it has been providing to the chip-baker – and any such savings can only help the company's bottom line.

This October, AMD announced that it would leverage the fabric clustering technology "secret sauce" it acquired when it bought SeaMicro in March to create ARM-based server chips as part of what Read called the company's plan to "reset and restructure" itself.

Those Opteron chips, however, which will be based on ARM's recently announced Cortex-A57 design, won't see the light of day until 2014. For AMD fans – and, full disclosure, your Reg reporter counts himself among them – 2013 will be a year of finger-crossing. ®

Boost IT visibility and business value

More from The Register

next story
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Microsoft exits climate denier lobby group
ALEC will have to do without Redmond, it seems
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.