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Puts communications group on block in hopes of sale by mid-2000
SUNNYVALE, CALIF. - Advanced Micro Devices Inc., fighting to survive its desperate microprocessor battle with Intel Corp., has announced it will sell off its communications-chip business, the second such divestiture this year. AMD unloaded its programmable-logic subsidiary, Vantis Corp., for $500 million this summer.
The sale could generate up to $600 million, according to one estimate-funds badly needed to fuel a successful launch of AMD's Athlon microprocessor. The company is just starting volume ramp-up of its high-performance chip, and is also beginning to convert Athlon to a 0.18-micron process. Both steps are sure to burn a lot of cash, and must be executed smoothly if AMD is to have a chance of being competitive with its much larger rival.
"They can use the money," said Joseph Osha, vice president at Merrill Lynch (New York). "If you look at their balance sheet relative to most semiconductor companies, it's pretty debt-- heavy." Earlier this year, AMD was dangerously close to violating some debt covenants relating to its new wafer fab in Dresden, Germany, and nearly was forced to do a round of equity financing, Osha said. The company pumped most ofthe proceeds of the Vantis sale into Dresden this summer.
The new sale makes strategic sense, said Mark Edelstone, vice president with Morgan Stanley (San Francisco). "They're in a high-risk game. When the challenge is to stay competitive in microprocessors and flash, you can't do a lot...