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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 217.53+1.5%Nov 28 9:30 AM EST
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To: Windsock who wrote (76435)4/3/2002 9:38:12 PM
From: ptannerRead Replies (1) of 275872
 
re: "AMD paid for none of the cost of the FASL fabs."

I don't believe this is wholly correct. To the extent that FASL is self-funding ($1.5B through 2001 per annual report) AMD is forgoing its share of the proceeds from current operations to further the expansion of the JV. In addition, both AMD and Fujitsu made $122M contributions to FASL during 01Q2 for JV2&3. AMD's annual report also noted that AMD may need to contribute cash or guarantee third party loans for full facilitization of these fabs. The current balance sheet also noted a $360M investment in FASL, up from $260M which would seem to reflect some form of prior cost contribution to FASL. FASL was a wonderful profit source in 2000 even while it was funding major capital expansions. However, we should learn more about the potential $125M liability from AMD's guarantee for FASL's Gresham fab at the 1Q earnings press conference.

With respect to UMC I also haven't seen any indication of how this will be funded. I don't believe AMD's technical contributions would merit 50% ownership since it would seem this would be primarily process related and the arrangement is different than FASL where both parties benefit from the design and share profits through product transfer pricing. Could the UMC JV plan to be largely self-financing with UMC and AMD providing loan guarantees?

-PT
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