AMD Shareholders: No Quorum, No Vote

What is quite possibly the biggest change in Advanced Micro Devices' (NYSE: AMD  ) rocky history was supposed to go to a shareholder vote Tuesday. A vote of "yea" would send AMD down an entirely new path, dressed in a lighter balance sheet and following in the footsteps of Texas Instruments (NYSE: TXN  ) and others. A "nay" vote would keep AMD's manufacturing in-house, for (a little bit of) good and for (mostly) bad.

So far, so good. But AMD threw the party and nobody showed up. Meeting adjourned until next week, folks. Grab a canape on your way out, and be sure to tell your friends about the luncheon spread!

AMD needed more than 50% of outstanding shares to have voted one way or another, but fell short of a quorum with just 42% of those stubs represented. And no, it's not my fault -- like 97% of those who did respond, I've voted my tiny hand in favor of the proposal and the dilutive stock actions required.

Look, folks: This is a big friggin' deal. I don't like dilution any more than the next shareholder, but spinning out the manufacturing arm to an Abu Dhabi investment firm makes too much sense to get hung up over that detail. The faster that AMD splits into two parts -- a heavy, expensive foundry, and a lightweight, nimble, securely funded chip-design company -- the better.

The company needs every advantage it can get in the neverending uphill fight against industry titan Intel (Nasdaq: INTC  ) . A rash of inexpensive and fast new chips is a start, but AMD needs to do more. Nobody wants to see the underdog carved up like a holiday turkey, the way I expect networking expert Nortel Networks (NYSE: NT  ) will end up. IBM (NYSE: IBM  ) could certainly afford to invest in AMD or buy it wholesale, but licensing issues and competitive forces make it safer for Big Blue to stay on the sidelines.

The stock plunged more than 10% on this news Tuesday. Feel free to pick up a few shares, contribute a bunch of votes, and get rich riding that bouncy stock back up when the vote passes.

And then hold tight for another year or two. Let the split work its magic while management gets back to running the business, undistracted by foundry operations, financial woes, and all the hassle of working out the whole split deal in the first place. You can thank me in 2011, Fool.

Further Foolishness:

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Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 11, 2009, at 6:42 PM, actue wrote:

    The foundry deal cannot possibly work. I don't know what can save AMD (if anything) but I do know this foundry thing is not it.

  • Report this Comment On February 11, 2009, at 6:48 PM, amadan123 wrote:

    Dear Anders, first time comment to Motley Fool. Your article on AMD's deal with FCH touched a nerve. I wonder if you've read the Master Agreement at all? Just a quick recap of the facts of this supposedly great deal;

    AMD receives $700m cash (now) from FCH plus gets to transfer $1.2b in debt to the Foundry company - of which they are still responsible for approx 34% as that is what their stake in Foundry will be. AMD also receives approx $116m in cash for the sale of 58m shares at an average price of $2 per share. WCH receives an 11% increase in its stake of AMD, an option to purchase another 3% of AMD at the same $2 average price per share, 66% of $4.1b in intellectual and manufacturing capital (incl. manufacturing patents) - all for the low price of $2.2b plus $116m for the 58m shares and a promise to invest a further minimum of $3.6b - of course all bets are off if they turn around and sell the company to another shell company from Abu Dhabi. So, in a nutshell, AMD receives a quick $800m for giving up 11% of AMD and 66% of its existing $4.1b in manufacturing capital - not to mention the patents and shareholder dilution. Oh, and I really have no axe to grind here, did you see the golden parachute that Mr. Ruiz is getting out of this?

    Regards - Karl Gannon

  • Report this Comment On February 12, 2009, at 12:38 AM, nerd1951 wrote:

    I don't see how this works in the long run. Texas Instruments can do it because they are not on the bleeding edge of processor technology but AMD is in the processor market. Foundry technology is just as important as processor design in this business.

    AMD has always done a great job designing processors. Many times they have jumped ahead of Intel in processor performance only to stumble in the transition to production. It's the foundry business that has always been their weakness and Intel's strength.

    Intel just announced that they are spending $7billion on new foundry construction and pushing 32 nm technology. Is the AMD foundry company going to be in a position to keep up with Intel? I just don't see how.

  • Report this Comment On February 12, 2009, at 2:29 AM, none0such wrote:

    Just my two cents - Texas Instruments has design-to-production issues for advanced node, non-processor chips that they contract to have produced: my brother-in-law at TSMC told me about one TI has just last week. The previous post would have us believe that contract fabricators would not be up to the task to ramp up processor chips which is (pardon the pun) unfounded. On the contrary, it is more likely that large contract foundries would be able of readily solve the different requirements for large scale manufacturing of advanced node processors given their experience at eliminating costly manufacturing mistakes early. Although I don't see the future profits the author of the article sees for AMD following this decision, I do see that continuing to do what they have been doing is a definite way to lose more money.

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