All Things Digital

If it’s true that “real men have fabs,” as Advanced Micro Devices Inc. Chairman W. J. “Jerry” Sanders III (at right in Indiana Jones drag) once said, then AMD is the semiconductor industry’s latest eunuch. This morning the chipmaker said it will spin off its manufacturing operations, splitting itself into two companies–one to design chips and one to make them. The new manufacturing company, called Foundry Co., will be a joint venture between AMD and two Abu Dhabi investment firms–Mubadala Development Co. and Advanced Technology Investment Co.–that have agreed to provide it with some $6 billion in financing to build a new chip fabrication plant, or fab, in upstate New York and upgrade one of two AMD fabs near Dresden, Germany.

A bold move for AMD (AMD), which has sustained seven straight quarters of losses, and one that could dramatically alter its fortunes. Indeed, right off the bat, AMD will push $1.2 billion in debt off its books and onto those of the The Foundry Co. “This is the biggest announcement in our history” said CEO chief executive, Dirk Meyer. “This will make us a financially stronger company, both in the near term and in the long term, as a result of being out from the capital expense burden we have had to bear.”

For a while there, it looked like Advanced Micro Devices (AMD) was really going to take Intel (INTC) to the mat, didn’t it? But not lately. After seven consecutive quarterly losses, AMD shares fell to a six-year low last month, down 50 percent in the past year. Good thing, then, that the company has chosen to sell off its digital television business, which these days is more of a distraction than anything else. This morning, the struggling chipmaker said Broadcom (BRCM) has agreed to buy its TV unit for $192.8 million.

For AMD, the sale frees it of a business that’s been a drain on capital expenses and, in the words of CEO Dirk Meyer, will make the company “leaner and more focused” while it seeks to “create a business model to deliver sustainable profitability.” For Broadcom it’s an easy way to immediately scale its DTV business from low-end to mid-range to high-end interactive platforms and panel processors.

Advanced Micro Devices has tapped Chief Operating Officer Dirk Meyer as its new CEO, replacing Hector Ruiz. Ruiz will become executive chairman of AMD (AMD) and executive chairman of the board of directors. The changes are effective immediately.

Ruiz announced the leadership change during AMD’s second-quarter financial earnings conference call. “The time is right to turn the company over to a new leader,” he said. And, given the company’s ugly $1.19 billion second-quarter loss, he would appear to be right. “We have not been living up to our potential,” Meyer said during a conference call. “Looking forward, we will. We will demand a pattern of sustained profitability…We will execute, execute and execute.”

Presumably, Meyer is refering to the company’s mission here and not AMD employees who’ve suffered enough already, I think.