SCUMbria - Dresden may be "parted out" next in AMD's Garage-SALE-A-THON !
07/29 12:38A (DJ) Advanced Micro Devices Mulls Partnership For New German Factory
Story 0010 (AMD, AMOD-D, MOT, I/CMT, I/SEM, I/TEL, N/HIY, N/HYL, N/TEC...) By Dean Takahashi, Staff Reporter of The Wall Street Journal
Advanced Micro Devices Inc., looking to reduce financial pressures, is considering seeking a partner to take a stake in a new $1.8 billion chip factory in Dresden, Germany. Fran Barton, chief financial officer of the Sunnyvale, Calif., chip company, confirmed in an interview that the company is analyzing its manufacturing capacity and whether it needs to find a partner, especially if it turns out the company might have excess capacity. The massive Dresden factory comes on line in the first quarter of 2000. "We are absolutely committed to Dresden," Mr. Barton said, referring to the company's plans to make updated versions of its flagship Athlon microprocessor at the factory. "But if we were to find ourselves with excess capacity, it would be good to have the option of a partner." Mr. Barton wouldn't specify the options AMD is considering, or whether it is already talking to potential partners.
But one person familiar with the matter said the company could seek to sell up to half of the plant. Industry executives say Motorola Inc. would be the most logical partner, though a Motorola spokesman declined comment. The Schaumburg, Ill.-based electronics company has committed itself to outsourcing half of its chip manufacturing in coming years and already supplies AMD with a copper-based manufacturing process that AMD will use in the factory. The Dresden factory is key to AMD Chief Executive Officer W. J. "Jerry" Sanders III's plan to use the powerful Athlon chip to grab 30% of the PC microprocessor market, up from AMD's current 12% share. Almost all of that increase will have to come at the expense of archrival Intel Corp.
But AMD's financial pressures are a big hurdle; it reported a $162 million loss in its latest second quarter, before extraordinary items, because of price-cutting by Intel and the costs of the Dresden factory. AMD, which also reported a $128 million loss in the first quarter, has already said it doesn't know when the company will be profitable again. AMD may not need all of Dresden's production capacity. Linley Gwennap, an analyst at Micro Design Resources Inc., said the company is expected to make 20 million of its K6 microprocessors this year, mostly at another large factory in Austin, Texas. AMD expects the Austin factory to hit its capacity limit in either the third or fourth quarter this year. Mr. Gwennap estimates the plant in Dresden could double AMD's capacity to 50 million chips a year by 2001.
While AMD might need all of that capacity if Athlon takes off -- demand for K6 chips is expected to decline as the Athlon takes its place -- the company needs a contingency plan for the huge new manufacturing capacity in case Athlon has trouble taking share from Intel, which has a stronghold in corporate computers, Mr. Gwennap said. The same person familiar with the matter said AMD executives have different opinions on what to do about the Dresden factory and it was one of the reasons for the recent resignation of Atiq Raza, chief operating officer. Mr. Raza is believed to have pushed AMD to look for a partner sooner than later while Mr. Sanders and other executives preferred a slower timetable to evaluate their options. Mr. Sanders and other AMD officials, as well as Mr. Raza, have declined to comment on the reasons for Mr. Raza's sudden departure, other than to say it was for "personal" reasons. Copyright (c) 1999 Dow Jones & Company, Inc. All Rights Reserved. Additional Codes (N/WEI, M/TEC, P/DCO, P/DCZ, P/DEE, P/DEX, P/DSE, P/DTE, P/NDV, R/CA, R/EU, R/GE, R/GER, R/IL, R/NME, R/PRM, R/US, R/USC, R/USW, R/WEU) |
