re: <how will the IPO work>
I believe I heard 3 clues:
1. AMD's stake will decline enough so that they don't have to "consolidate" results anymore, but show it as a minority interest. This implies that AMD's ownership will change from 60% to something less than 50%.
2. Spansion itself will receive cash from the IPO, possibly also Fujitsu, not sure about Fujitsu. So that means that new shares are being issued in the name of Spansion.
3. AMD will NOT receive any cash from the new investors
After the IPO, the following will be true --
1. Any debt that Spansion has now, will be removed from the books of AMD
2. If spansion has a loss of X in Q2 or later, AMD will have a single line item in the P&L that says,
"Gain(loss) in minority interest of Spansion ...... ($X*r)"
"r" is unknown but I would guess in the 0.4 to 0.5 range. That would not be a great improvement of the nominal 0.6 value that applies until now.
But there are other improvements:
1) 100% of Spansion profit(loss) is part of Operating Income now, 0% in the future
2) The "minority interest" won't affect gross margin calculations like it does now.
3) Spansion revenue won't have any effect at all on AMD's top line.
4) All Spansion debt and Spansion assets will be removed from AMD's balance sheet
5) Consolidation of Spansion has totally obfuscated AMD's financial ratios and made the company very difficult to analyze.
With anything above about 40%, AMD would most likely retain effective control of Spansion.
For example, AMD might currently own 30M shares of Spansion, then Fujitsu owns 20M. Suppose they can manage to sell 25M shares to the public. Then AMD would own 40%, Fujitsu 27%, and the buyers 33%. What might they ask for those 25M shares? Well, its a business with about $1,800M of annual sales, but in the current environment, they'd be lucky to get a price to sales of 0.5, or $900M. So the amount of money raised would be $300M (1/3 of total value) for those 25M shares, or $12/share.)
Petz |
