Advanced Micro Devices (NYSE: AMD ) just got a much-needed shot of cash in its anemic arm.
Communications chip company Broadcom (Nasdaq: BRCM ) has agreed to buy AMD's digital TV business, complete with 530 former ATI employees, for $193 million in cash. If the deal passes regulatory muster -- and I don't see why it wouldn't with qualified competition from the likes of Texas Instruments (NYSE: TXN ) and STMicroelectronics (NYSE: STM ) -- then the Washington Generals to Intel's (Nasdaq: INTC ) Harlem Globetrotters gets a whole lot stronger in one fell swoop.
Recently crowned AMD CEO Dirk Meyer says that the move will "strengthen our balance sheet, lower our breakeven point, and hone our focus" on the company's core business, implying that some of what ATI did falls outside AMD's wheelhouse. The current cash crunch is a direct result of that 2006 acquisition, as AMD had to fund most of the $5.4 billion purchase price with new debt.
What's left of AMD/ATI is starting to look impressive. Faced with dramatically stronger Intel chips, AMD has stepped up with its Puma notebook platform, and the upcoming Shanghai chips should steal back some of that lost enterprise server market share. The graphics products have also bounced back from a definite also-ran position, to the point where even NVIDIA's (Nasdaq: NVDA ) management says that they're impressed.
Continue down that track with sharper focus on AMD's core competencies and continued excellent execution, and there's no reason why the fallen Phoenix couldn't rise from its ashes and pose a long-term threat to mighty Intel again. But the company is still a long way away from paying off its debts -- around $5 billion in long-term debt and $1.6 billion in cash equivalents, last time we checked.
Hey, nurse? Keep those units coming. I'm not giving up on this patient.