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AMD sells, leases back Singapore facility

AMD sells, leases back Singapore facility

AMD's financials need another cash injection, so the company has signed a deal to sell and lease back another of its properties - this time a production and engineering facility in Singapore.

AMD appears to be lacking in confidence that it will hit its self-imposed deadline for a return to profit - or at least an end to its ongoing losses - next quarter, and is turning to yet another property sale and leaseback to boost its balance sheet.

AMD has been in financial trouble for quite some time, losing significant ground to long-time rival Intel in the majority of its markets. While the company's graphics division, formerly known as ATI, continues to compete well against Nvidia, even the most die-hard AMD fan can't help but admit that the company's processors - with the possible exception of its low-end APU products - are failing to offer any real competition to Intel's far more powerful designs.

The company has long promised that the lean times are coming to a close, however, claiming back in April that it is due for a comeback any quarter now. To be fair to the company, while its losses continue they are slowing - the company's last quarter is looking a lot healthier, and soon the company will be enjoying the benefit of having its APU technology power both the Sony PlayStation 4 and Microsoft Xbox One next-generation games consoles.

Sadly, AMD doesn't have time on its side: last year, the company promised its investors that it would have at least reached break-even - if not outright profit - by the end of this financial year, and the clock is ticking. Accordingly, it has been boosting its bottom line with property sales - starting with the sale of its Texas headquarters back in April, which raised $164 million in cash.

A sale and leaseback, where the property is sold for a cash injection but with an agreement that the company can rent it for a fixed period for its new owner, is a neat way to boost income - but it's a short-term fix. By selling its properties, AMD receives a cash injection for the quarter - but next quarter finds itself bogged down by rent payments it wasn't previously having to make, which continues every quarter thereafter.

Now, the company has indicated that its financials aren't improving at a rate which will settle antsy investors - meaning it's time for another sale-and-leaseback deal, this time on the company's Singapore facility. The deal sees a real estate investment trust, run by HSBC, pick up the manufacturing and engineering facility for around £29.6 million in cash with the agreement that AMD will lease the property for the next ten years.

AMD, naturally, is spinning the move as a positive step in its ongoing strategy to 'reduce investments and capital in non-core parts of the business, including real estate' - and investors seem to be happy with the deal, with the company's stock price up half a percent in after-hours trading following the announcement.

UPDATE
AMD has confirmed that the sale and leaseback of its Singapore facility forms part of its long-term plan, and is primarily related to the company concentrating on engineering there than production. 'The sale and long-term leaseback announcement we made yesterday was not a surprise to our employees or the business community in Singapore,' an AMD spokesperson has confirmed to bit-tech. 'We shared our intention to seek a sale and long-term leaseback earlier in the year in Singapore as part of that site's transformation from a back-end manufacturing facility to an engineering centre of excellence for AMD.

'As you can imagine, you need a lot more square footage for manufacturing operations than you do for engineering professionals. With that in-mind, and as part of our restructuring effort in 2012, it made sound business sense to sell and lease back a smaller square footage area of the Singapore building.
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15 Comments

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Corky42 23rd August 2013, 11:28 Quote
Are they just putting of the inevitable, or riding out a storm.
barny2767 23rd August 2013, 11:30 Quote
Still not looking good for AMD unless there selling up and leasing while they build a new bigger facility, but I doubt that's the case.

I do like AMD and hope they give me a reason to stay with them when I need a new mobo and CPU.
mi1ez 23rd August 2013, 11:40 Quote
I would love the money from the consoles to enable the research to compete with Intel again. Don't want them getting complacent!
mi1ez 23rd August 2013, 11:41 Quote
Quote:
Originally Posted by mi1ez
I would love the money from the consoles to enable the research to compete with Intel again. Don't want them getting complacent!
* compete with Intel in the high-end performance space
rollo 23rd August 2013, 11:47 Quote
AMD need the cash from consoles to Survive, Competeting with Intel is not even on the same menu.

They are delaying the Inevitable as it stands which is a buy out or bankruptcy.

They have now basically ran out of assets to sell last I checked which means they must be struggling for cash. Everyone has been saying if they dropped below 1bil in cash in hand they would be forced into a sale. Was also one of the highest movers in share sales and buys when this deal was announced something like close to 27million shares in a days trade.
damien c 23rd August 2013, 13:42 Quote
Hmm I wonder if they do go up for sale if Intel or Nvidia decides to put in a bid.
schmidtbag 23rd August 2013, 15:55 Quote
If AMD sold their CPU division, or, if their ARM hybrid chip happens to do what it should, they'd probably do alright. Most of their non-CPU hardware is really pretty good, particularly for the price.

It'd be nice is Samsung would buy out AMD. That would probably terrify intel. But, the problem is Samsung doesn't seem to seriously care about MS, and x86 is pretty much only NEEDED by Windows at this point. Windows is taking some huge losses in market share lately, so there's a possibility companies like Samsung are intentionally letting AMD die off because by the time they will, Intel won't be a monopolizing risk anymore. Intel will rule the world of x86 PCs, but they won't rule servers, tablets, phones, netbooks, or robots.

I always wonder how different this AMD vs Intel situation would be if Apple chose AMD instead of Intel back in 2006.
rollo 23rd August 2013, 16:29 Quote
Probably little difference, AMDs biggest issue since around 2008 has been its decline of server products. It slipped below 15% last month and it was around the mid 40s when they brought out ATI.

The ATI merger also killed most of there cash surplus and has not really made great money. I'd be shocked if the ATI investment is even at the break even stage they paid well over $4billion for it and they are not making 250mil+ a quater from it more like 20-50 mil some quaters loosing money on other quarters.

If AMD where offered an option to sell the ATI business and still use the gpus that company made in there apus I think they would bite there hands off.
Corky42 23rd August 2013, 17:44 Quote
AMD are doing better than there rivals in the graphics chip market.
http://jonpeddie.com/press-releases/details/amd-winner-in-q2-intel-up-nvidia-down/
Quote:
AMD overall unit shipments increased 10.9%, quarter-to-quarter, Intel increased 6.2%, and Nvidia decreased by 8%.
ksyruz 23rd August 2013, 20:12 Quote
Quote:
Originally Posted by schmidtbag
... It'd be nice is Samsung would buy out AMD...

Actually it would be better for Google to take them and use the ARM hybrids for creating servers, tablets, phones, and PC chipsets to run on chrome or Android. Having AMD and Motorola would make some mean products of the future.

Just think with ARM moving to 64-bit and having an AMD APU in a mobile phone. Also with AMD being the next generation of gaming consoles processors, gaming companies would be able to easily transfer console and PC games to Android mobile devices.
fluxtatic 24th August 2013, 07:23 Quote
IIRC, Intel has rights of refusal on AMD's x86 license should AMD get bought out/declare bankruptcy. Meaning, if Samsung put in a bid, Intel would shoot the transfer of the x86 license right down. Intel will not let that license go to a company that might actually have a shot at getting competitive. Samsung is already something of a competitor and will be more so once Intel gets serious about making Atom a true mobile-friendly processor.

I'd be curious to see how the feds would react, too - seems a bit anticompetitive that Intel controls who would be able to get their hands on the only other x86 license in existence. Then again, Intel and the feds are no strangers to buyoffs/kickbacks/quids pro quo...
schmidtbag 24th August 2013, 15:31 Quote
Quote:
Originally Posted by fluxtatic
IIRC, Intel has rights of refusal on AMD's x86 license should AMD get bought out/declare bankruptcy. Meaning, if Samsung put in a bid, Intel would shoot the transfer of the x86 license right down. Intel will not let that license go to a company that might actually have a shot at getting competitive. Samsung is already something of a competitor and will be more so once Intel gets serious about making Atom a true mobile-friendly processor.

I'd be curious to see how the feds would react, too - seems a bit anticompetitive that Intel controls who would be able to get their hands on the only other x86 license in existence. Then again, Intel and the feds are no strangers to buyoffs/kickbacks/quids pro quo...

Actually depending on when this would supposedly happen, intel would be smart NOT to refuse the license, because they'd get in serious trouble with monopolizing. ARM is not yet making enough of a dent, and VIA is just a bug compared to Intel. If in a few years ARM based systems get about 40% of the PC market share, that's when intel could decide to bully other x86 developers. Intel has tried killing off AMD several times and EASILY could have if laws didn't restrict them. AMD is lucky to be in business today, and considering their situation, they make fantastic products. It annoys me when people expect AMD to beat out intel when their net income is lower than intel's profits.
Gareth Halfacree 24th August 2013, 15:33 Quote
Article updated: AMD has said that the move has been planned for some time, and is more to do with the shift from a production to an engineering facility than a desire for a swift cash injection ahead of the self-imposed profit deadline.
faugusztin 24th August 2013, 15:40 Quote
Quote:
Originally Posted by fluxtatic
I'd be curious to see how the feds would react, too - seems a bit anticompetitive that Intel controls who would be able to get their hands on the only other x86 license in existence. Then again, Intel and the feds are no strangers to buyoffs/kickbacks/quids pro quo...

Actually, Intel could not refuse anyone who would buy AMD. First of all it would instantly mean Intel forced split, second it would mean Intel losing licence to most of the x64 features, as Intel licences those from AMD. And you can guess what is worth a Intel CPU without x64 support - nothing.
Bluephoenix 26th August 2013, 22:24 Quote
It's very quid pro quo on the x86 license, intel keeps its x64 license, and AMD gets to keep the x86 license.

Acquisition by Samsung is the only thing I could see seriously changing the rules of the game.
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