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AMD is selling 58-acre Austin, Texas campus to raise cash

by Mark Tyson on 29 November 2012, 10:30

Tags: AMD (NYSE:AMD)

Quick Link: HEXUS.net/qabpr5

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AMD intends to sell off its 58-acre Austin, Texas, campus in order to raise cash. The site will be sold for a sum of between $150 million and $200 million in Q2 2013, if things move ahead as planned. The move is to help fund AMD through its diversification into markets other than PCs, reports Reuters.

AMD company spokesman Drew Prairie went some way to explain the move and its timing “There are favourable economic conditions in the part of Austin where the campus is located,” he said. “Contingent on finding an investor who wants to do a multiyear lease-back, it's a good opportunity for us to unlock the value of the real estate to fund operations.” This move isn’t something new and startling for AMD; the company’s HQ in Silicon Valley and some premises in Toronto, Canada, have also have been sold and leased previously.

A fortnight ago we heard reports that AMD had hired JP Morgan to look into the potential break-up and sell-off of the company. The sources at that time said that “an outright sale of the company is not the main option”. Perhaps this is one of the money-making initiatives coming from the JP Morgan consultation. Further restructuring, which seems to be a euphemism for cuts, came to light in October when AMD reported a loss of $157 million in Q3 2012 and that it would be laying-off 15 per cent of its workforce.

We all know it’s much easier to spend cash than to make it and AMD’s cash reserves are currently paying testament to this. The company’s cash pile declined $279 million in Q3, to $1.48 billion. With the recent reductions in the size of AMD’s operations it said that the optimal cash reserves will be somewhat lower at around $1.1 billion.

None of the reports I have read detail the costs that AMD will incur from leasing the premises that it once owned. It definitely seems to be a less long-term strategy. In a way it reminds me of the old people who are persuaded to sell-off their houses to pay for retirement costs. Let’s hope that is not what is happening to AMD and that the money injected from the sale will be used to invest in future leading-chip designs.



HEXUS Forums :: 9 Comments

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tbh this smells more like budget management to me. Selling the site then leasing it back is likely to shift the expenditure to a different set of budgets with different constraints, and may make the accounts look better without actually saving money. Better looking accounts (and a higher balance book) will encourage investors, and happier investors are a big win for AMD.
scaryjim
tbh this smells more like budget management to me.

Indeed. Smells like someone's seriously after performance bonuses. Question is, will AMD realize they're being had?
To me this seems like they are runing out of money and are trying all the tricks in the book, dark days ahead for AMD.
howdee
... will AMD realize they're being had?

I'm not convinced they are being had. Budget restructuring can - AFAIK at least - do wonders for the profitability of a company without making a significant difference to their actual operating costs. It's all to do with what you can and can't offset against each other, I think - although I have to admit that even starting to think about finance and accountancy makes my eyelids heavy! ;)

According to the article AMD have cash reserves of ~ $1.5 billion - hardly running out of money. What they need is to be profitable - many more quarters of loss and the bank balance will start to look a little vulnerable, scaring off investors. A bit of book-keeping trickery to boost the balance sheet and make the company look more profitable will keep investors happy and give AMD a much better chance to follow through on their long-term plans. Not sure why everyone is predicting so much doom and gloom when AMD are actually still in reasonable shape. There's plenty of time for them to restructure, produce good new products, and flourish again. I suspect (although I don't have time to research it) that they're in much better shape now than they were in late 2008/early 2009...
scaryjim
Not sure why everyone is predicting so much doom and gloom when AMD are actually still in reasonable shape.

Its a chicken little mentality.