AMD disappointed by acquired units
SAN JOSE — Struggling to climb back to profitability, Advanced Micro Devices Inc. suffered another setback Friday when the chip maker disclosed that two businesses it acquired in a pricey acquisition were underperforming.
AMD said the businesses’ values would have to be reduced by $880 million. It’s the second time AMD has had to slash the value of firms it absorbed as part of its controversial acquisition of graphics chip maker ATI Technologies Inc.
Shares of AMD fell 12 cents, or 2.4%, to $4.84 Friday, after earlier changing hands at $4.60, their lowest point since October 2002.
Sunnyvale, Calif.-based AMD is the world’s No. 2 maker of microprocessors, the brains of personal computers.
AMD and its much-larger rival, Intel Corp., are pushing deeper into graphics technologies -- typically handled on separate chips -- as demand intensifies for computers to render better graphics for Internet video, computer games and high-definition movies.
Santa Clara, Calif.-based Intel has chosen to beef up the graphics capabilities of its chips in-house, while AMD decided to buy its way in with the $5.6-billion acquisition of ATI in October 2006 -- a decision that is still hurting the company financially.
AMD is the world’s second-largest maker of stand-alone graphics chips, behind Santa Clara-based Nvidia Corp.
In a filing with the Securities and Exchange Commission, AMD said it recently discovered that its business units that make chips for cellphones and digital televisions -- both acquired as part of the ATI transaction and considered “noncore” parts of AMD’s operations -- weren’t performing up to expectations.
As a result, the company plans to write down the value of their goodwill -- intangible assets such as reputation -- and take charges of $880 million in the latest quarter, which ended June 28.
AMD had written down ATI’s overall value by $1.6 billion in January in a staggering reassessment indicating that perceptions of ATI in the marketplace had slipped dramatically.
Taken together, AMD has effectively said that ATI is now worth 44% less as a company than when AMD bought it.
