AMD Cuts Down Safety Net

To offset a maturing computer market, look for AMD to try and expand into new markets with its computer chips.

The company provided a clue about this strategy in a press release late Wednesday that got plowed under by announcements about its worse-than-expected financial results and the IPO.

AMD combined its chip businesses into a "microprocessor solutions sector." The company said in its release that realigning its chip divisions this way will allow it to reach "a wider range of customers and markets around the world." AMD specifically cited markets such as consumer electronics and embedded applications, which would include automotive electronics, networking and telecom equipment.

The financial impact of getting rid of Spansion is unclear, but AMD said it will work toward a debt-to-capital figure of 20% and gross margins above 60%. AMD's current debt-to-capital is around 31%, and its margins in the first quarter were 34.1%.

Expect AMD to retain a stake in Spansion for the immediate term and possibly longer. Terms of the IPO have not yet been set, but AMD and Fujitsu will have board representatives after the company goes public. Rivet said that AMD will maintain a minority interest in Spansion.

AMD showed strong results from its flash memory moves for over a year, but then Intel bit back and took a chunk out of AMD. Now AMD has run away. Intel has also made strong moves lately in its primary computer chip business, but AMD can't run away from this market -- it's all the company has left.

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