AMD hives off factories in bid to fight Intel

Chip maker Advanced Micro Devices said on Tuesday it will hive off its pricey manufacturing plants, get a cash injection and shrink its debt to compete harder against bigger rival Intel for market share.

Two Abu Dahabi state-owned venture capital companies are backing the move. One will put up at least $5.7 billion into the spun off factories and the other will buy more than $300 million in AMD stock and warrants.

Wall Street has waited for months for struggling AMD to formulate plans to split up the company, a so-called 'smart asset' strategy aimed at letting the company invest more in developing chips and less in costly factories.

"Today is a landmark day for AMD, creating a financially stronger company with a tightened focus," Dirk Meyer, president and chief executive officer of AMD, said in a statement.

The new factory-owning Foundry Company will assume all $1.2 billion of AMD's manufacturing operations debt so the remaining firm can compete hard against Intel, which sells about 80 percent of the central processing units at the heart of the world's 1 billion personal computers. AMD makes the rest.

AMD has always struggled against its bigger competitor and in the last few years was forced to weigh the price of its pride in owning the fabricating plants, or "fabs," which most other chip makers gave up long ago.

AMD has lost market share since it was hit by problems with its high-end personal computer and server Barcelona chip, and had bumps along the road after acquiring graphics chip maker ATI. The European Commission has charged Intel illegally paid computer makers and retailers to avoid AMD.