AMD Clears the Deck

Advanced Micro Devices(AMD - Cramer's Take - Stockpickr) has spun off a small chip business as the company focuses its energy on taking on microprocessor giant Intel(INTC - Cramer's Take - Stockpickr).

Sunnyvale, Calif.-based AMD announced Tuesday that it has formed a strategic partnership with Raza Microelectronics, whereby AMD will transfer its Alchemy line of embedded processors to RMI. Terms of the deal were not disclosed, although AMD said it will become an investor in RMI.

"RMI is a well-respected company, and we believe that RMI is in an excellent position to leverage their MIPS technology leadership to invest in the future growth of the world-class Alchemy processor family," said AMD CEO Hector Ruiz in a statement.

RMI, a privately held chip company based in Cupertino, Calif., was founded by Atiq Raza, the former president of AMD.

According to AMD, the deal will transfer the Alchemy product line and operations to RMI. An AMD spokesperson said she couldn't specify which particular assets are included in Alchemy's operations. But, she noted, "as far as the design team and the other employees, RMI is expected to extend offers of employment to some of the employees who have worked on the Alchemy product line."

AMD does not manufacture Alchemy chips itself, but subcontracts the job to a third-party foundry.

AMD's Alchemy line of chips are designed to be embedded in devices where low power consumption is important, such as portable media players and Internet access points. AMD acquired Alchemy in 2002 in a transaction whose terms were not disclosed.

While AMD doesn't break out individual financial figures for the Alchemy business, AMD's overall embedded-processor division recorded a $55 million operating loss on sales of $136 million in 2005, with Alchemy and certain networking products posting a $15 million decrease in sales that year.

Alchemy is one of two chip lines within AMD's embedded-processor division and is based on the MIPS architecture. Geode, AMD's other embedded-processor line, is based on the x86 architecture that AMD uses in its flagship line of microprocessors.