Advanced Micro Devices May Spin Off Vantis Unit to Raise Money
Washington, July 9 (Bloomberg) -- Advanced Micro Devices Inc., Intel Corp.'s
biggest rival in microprocessors, disclosed it may seek to raise money by spinning off
its Vantis unit or offering new stock.
The Sunnyvale, California chipmaker outlined ways it may raise more money in a
regulatory document filed a day after the company reported a larger-than-expected
$64.6 million second- quarter loss. The loss sent AMD shares down as much as 15
percent today.
A Vantis spinoff ''may represent a low-cost financing source,'' said Tad LaFountain,
an analyst at Needham & Co. Inc. The company ''has gone through cash at a fairly
prodigious rate,'' said LaFountain, who has a ''buy'' rating on AMD.
Vantis makes so-called programmable logic devices, which are used in data
networking and communications equipment.
It's ''been rumored that this was going to happen for the last six months,'' said David
Wu, an analyst at ABN Amro Inc. in San Francisco. ''I think Vantis would do better
on their own than with AMD.''
AMD disclosed the possible securities sales in an amended credit agreement filed with
the U.S. Securities and Exchange Commission. The agreement is between Advanced
Micro and a group of banks led by ABN Amro Bank NV.
The revised agreement calls for AMD, beginning with the current quarter, to maintain
a consolidated tangible net worth that equals at least $1.92 billion plus any money the
company raises by selling its own shares or those of Vantis.
AMD is less likely to offer its own stock, in part because the company raised more
than $517 million in May through a convertible debenture offering, some analysts said.
I wouldn't get too excited about it,'' said Sutro & Co. analyst C.B. Lee. ''Given that
they just did a debt offering it's not likely they'd want to issue more debt to raise
money. They're trying to keep their options open, including the spinoff of Vantis.''
AMD spokesman Scott Allen said the company might need to raise more money
because ''we're in a portion of the business that is extremely capital intensive,'' he
said. ''Our primary business is microprocessors and, put simply, it's very expensive to
be in the microprocessor business.'' Allen couldn't say whether or when AMD would
raise more money.
Under the amended terms of the credit agreement, AMD also promised that its net
loss would not exceed $20 million for the third quarter of this year. The revised credit
agreement also calls for AMD to earn at least $1 during the last quarter of 1998.
AMD renegotiated its credit arrangement with ABN Amro Bank to ensure the
chipmaker could comply with the bank's loan terms during economic problems in
Asia, said AMD's Allen.
The company lost $64.6 million, or 45 cents a diluted share, in the second quarter
compared with a profit of $9.97 million, or 7 cents, in the same period a year earlier.
Analysts expected the company to lose 20 cents a share, according to First Call
Corp.
AMD shares fell 2 1/4 to close at 15 7/8.
17:18:35 07/09/1998
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