Mubadala Reinvests in AMD to Maintain Liquidity
Stock in Advanced Micro Devices, Inc. (NYSE: AMD), the second-largest maker of personal computer processors, traded higher Monday and today after its largest shareholder took steps to avert a potential cash shortfall.
Mubadala Development Company, the investment arm of the government of Abu Dhabi, increased its share of AMD by 19 percent and took an extra board seat last month, in a move that positions the company to bail out AMD should their cash reserves dip too low.
Mubadala became AMD's largest shareholder back in 2008, and bought AMD's manufacturing facilities in order to create GlobalFoundries, a made-to-order semiconductor producer that now has AMD as one of its largest customers.
AMD shares have lost about 56 percent so far this year, and concerns about the company's volatility continue amidst the recent gains facilitated in part by Mubadala. On Monday, AMD stock closed at $2.36 per share, the company's highest since October 18th, but analysts remain cautious.
In October, AMD forecasted fourth quarter sales numbers below analysts' predictions, and cited weak demand in all of their product lines as the driving force behind cutting 15 percent of their staff. Revenue projections put the company on track to experience its fourth consecutive quarterly sales decline, which has led analysts to believe that AMD's cash reserves will fail at some point in the near future.
To boost cash reserves, AMD announced last week that it will sell facilities in Austin, Texas in an effort to raise between $150 million to $200 million. The company is expected to close the deal in the first quarter. After selling the space, AMD plans to lease it back.
Mubadala now has a 15 percent stake in AMD, and unexercised warrants for additional stock purchases bring its total holdings to about 19 percent. Its latest re-investment in the company has helped ease concerns about AMD's liquidity, and at the time of this writing AMD's stock had risen an additional five percent since yesterday's strong close.
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