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Oct. 7 (Bloomberg) — Advanced Micro Devices Inc., the chipmaker struggling to take on Intel Corp., rose the most in six years after deciding to spin off some plants, part of an investment of up to $8.4 billion from the Abu Dhabi government.

AMD climbed 70 cents, or 17 percent, to $4.93 at 10:19 a.m. in New York Stock Exchange composite trading. Earlier the shares advanced as much as 31 percent, the most since October 2002.

The cash infusion is a lifeline for AMD, which may report a third straight loss this year and is falling behind on investments needed to keep up. Intel spends more on plants and research than AMD makes in annual revenue.

“People thought that AMD was on the brink of bankruptcy,” said Doug Freedman, an analyst at American Technology Research in San Francisco. “It definitely pushes them far away from that.”

The Abu Dhabi government will pay $700 million for a stake in a new entity that will own two plants in Germany and build another in New York, AMD said yesterday. The new company also will get as much as $6 billion from Abu Dhabi to expand the factories and $1.4 billion in operating capital. Abu Dhabi also will pay $314 million to double its stake in AMD to 19 percent.

The new company, to be called Foundry Co. temporarily, will assume $1.2 billion of AMD’s debt. AMD’s 6 percent convertible notes due in 2015 jumped 7.8 cents, or 20 percent, to 46.9 cents on the dollar to yield 21.5 percent, according to Trace, the Financial Industry Regulatory Authority’s bond-pricing service. That’s the biggest one-day gain since the securities were sold in April 2007.

AMD’s Struggles

The business will make processors for AMD and seek contracts from other companies, while AMD will continue to design and market chips. That means AMD can develop products without investing billions of dollars in plants, said Dirk Meyer, who became AMD chief executive officer in July.

“It will make AMD financially strong and more tightly focused,” Meyer, 46, said in a telephone interview.

AMD, based in Sunnyvale, California, has struggled since its founding in 1969 to keep up with Intel. AMD has posted nine annual losses in the past 15 years and its stock had fallen 90 percent since reaching $42.10 in February 2006.

Abu Dhabi is building on a 2007 investment as it seeks a foothold in the chip industry. Advanced Technology Investment Co., a newly created arm of the Abu Dhabi government, will own about 56 percent of the manufacturing company, leaving AMD with the rest.

About 3,000 of AMD’s 16,000 workers will move to Foundry Co., which will be led by AMD executive Doug Grose. AMD Chairman and former CEO Hector Ruiz will step down as a director and head the board at the new company.

Bloomberg

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