ATIC Will Continue to Invest into Globalfoundries Despite Dubai’s Debt Problems - Analyst

Analyst: Dubai's Debt Crisis Will Not Impact AMD, Globalfoundries

by Anton Shilov
12/03/2009 | 08:00 PM

The government-controlled investment companies of Abu Dhabi – Advanced Technology Investment Company and Mubadala – will continue to invest into their strategic high-tech companies, namely Globalfoundries and Advanced Micro Devices, despite of debt problems in Dubai and the possibility that the capital of the United Arab Emirates will have to bail out this part of the union, according to an analyst.

 

Last week state-owned construction company Dubai World announced that it would delay paying some of its debts due to slow sales and declining prices of luxurious real estate. The company has debts of $59 billion and Dubai’s total debt is $80 billion. Many observers noted that Dubai might ask Abu Dhabi, the capital of United Arab Emirates, to help it with payments. Abu Dhabi has a sovereign fund valued at $700 – $800 billion in assets, however, amid slow market it might slowdown investments via ATIC and Mubadala. However, an analyst said that Abu Dhabi will continue to invest into high-tech companies in order to form the basis for long-term profits.

"We believe these concerns are unwarranted and are reiterating our BUY rating on AMD. We are also raising our estimates on lower interest expenses anticipated through reduction of 2012 debt. […] If Abu Dhabi does end up helping out Dubai, we believe this would be unlikely to disturb any activities of ATIC. ATIC's mandate is to develop new foundations for long-term growth; we expect that to remain a very high priority for the government,” a note from a financial analysts at FTN Equity Capital Markets Corp. reads, reports EETimes web-site.

Mubadala Development is the largest shareholder of Advanced Micro Devices, whereas ATIC co-owns Globalfoundries together with AMD. Any potential problem in UAE has direct impact onto AMD’s business and future prospects.

“In all, ATIC has committed approximately $12 billion to the AMD/Globalfoundries effort and has set aside $4 billion to $6 billion just for the build-out of Dresden and New York facilities. These commitments are ring-fenced from any other funding needs and activities. All indications point to an acceleration of the spending timetable at Globalfoundries, rather than a slowdown,” the note claims.

Even though the debt crisis has no impact on AMD and Globalfoundries, it may have impact on Dubai Silicon Oasis, a special technology park with zero tax regime and additional incentives that is aimed at high-tech industries. The total cost of the park is estimated to be $1.3 billion.