AMD to Abandon Flash Memory Business

Spansion to be Spun Off, or Sold Off

by Yaroslav Lyssenko

[ 06/27/2005 | 07:07 PM ]

Advanced Micro Devises flash business has historically been profitable and actually boosted the company’s revenue when its main – processor – business faced the doldrums: while AMD failed to deliver competitive and powerful microprocessors, the flash division could report significant sales. However, with Intel’s aggressive move to boost its flash memory market share, everything changed for AMD and now it has to make a decision about what to do with its non-profitable flash business.

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“In April, AMD Chief Executive Hector Ruiz announced the outfit would be taking its Spansion flash memory business public after the division dragged down what would otherwise have been solid earnings in the first three months of the year. While Spansion contributed 36.4% of AMD’s $1.2 billion sales in the quarter, which ended Mar. 27, it lost $110 million, leading to a net loss of $17.4 million. Spansion is a joint venture between AMD and Japanese electronics giant Fujitsu, with AMD holding the majority stake,” writes BusinessWeek Online.

“Now the Sunnyvale, Calif., chipmaker is moving to shore up its balance sheet. On June 16, AMD filed amended documents with the SEC in which the company’s lenders agreed to drop a requirement that the Spansion operation maintain a certain level of cash, approximately $44 million,” continues the article.

“You strip the business of cash right before a spin-off or a sell-off,” says Eric Ross, an analyst with investment firm ThinkEquity Partners in New York.

• BusinessWeek Online: For AMD, a Thorny Dilemma.