AMD Can't Survive on Split Alone

SAN FRANCISCO -- Advanced Micro Devices(AMD Quote - Cramer on AMD - Stock Picks) made what may have been the most eagerly-anticipated announcement in the chip business Tuesday, providing details on a plan to split the company into two entities.

Investors greeted the news with joy, sending AMD's battered shares up more than 18% in midday trading.

But investors are not under any illusion that the change will instantly fix all the problems plaguing AMD, or put it back on equal footing in its battle with Intel(INTC Quote - Cramer on INTC - Stock Picks), the world's No.1 chipmaker.

AMD has its work cut out for it over the next several months, clearing a slew of regulatory hurdles, before it can even address the challenge of proving its new structure's viability in the market.

But the fact that AMD finally got a deal done, after more than a year in the works, and the immediate liquidity boost resulting from the deal, at least gives the company some more breathing room. And in AMD's dire situation, that alone makes the company better off today than it was yesterday.

"It's instilling confidence that they still can get capital when they need capital. And that's key," says Merritt Capital Management's Shane Merritt, which owns AMD shares.

The fundamental structure of the plan, a complex arrangement involving multiple parties, is essentially as expected, with AMD spinning off its chip manufacturing assets into a separate organization currently dubbed The Foundry Company.

Once again, AMD's lifeline comes from the oil-rich city of Abu Dhabi, capital of the United Arab Emirates.

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