AMD to sell, lease back Austin campus

Officially, AMD is headquartered in Sunnyvale, California. However, the bulk of the company’s activities go down at its Austin, Texas and Markham, Ontario campuses. That makes today’s Reuters piece rather surprising. According to the news agency, AMD is going to sell its Austin campus and lease it back in order to free up cash—sort of like a home equity loan, only with big companies and a lot more money involved.

How much money? $150-200 million, according to AMD spokesman Drew Prairie, who says a deal on the 58-acre campus is expected to close in the second quarter of next year. Prairie also gave Reuters the following statement:

“There are favorable economic conditions in the part of Austin where the campus is located,” Prairie 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.”

Interestingly, Prairie added that the Sunnyvale headquarters and “a building near Toronto” (presumably in Markham) were also sold and leased back. Reuters doesn’t say how much AMD got out of those deals, but if anything, this tells us AMD may well be desperate for cash right now. Considering the company posted yet another loss last quarter and simultaneously announced a 15% workforce cut, that wouldn’t be surprising.

Another Reuters story posted earlier this month said AMD hired JPMorgan Chase to “explore options,” including a potential sale of some or all of its assets. That time, however, AMD went on record to deny the allegations. “AMD is not actively pursuing a sale of the company or significant assets at this time,” the company stated.

Update 11/29 10:36 AM: AMD’s Drew Prairie e-mailed us to note that the Markham and Sunnyvale campuses weren’t sold recently. “Both transactions occurred several years ago,” he wrote. Prairie also added, “This is a fairly common business practice and something we (and many other businesses) have done.”

Comments closed
    • uwsalt
    • 7 years ago

    Sale leaseback transactions like this are pretty commonplace deal structures where one party wants to finance a large capital asset in a tax-favored manner. From an economic perspective, it’s not much different from mortgaging the property. The latter is a secured loan, the former is a lease, which matters for tax reasons but yields the same result for the company from a cash perspective.

    AMD has some cash problems, which isn’t exactly news, and this is probably meant to alleviate that (at least in the short term). But the sale aspect of the deal structure itself isn’t particularly eyebrow raising.

    • BlackStar
    • 7 years ago

    AMD is following the successful example of Silicon Graphics! Oh, wait.

    (Silicon Graphics started leasing its assets when its core business imploded. It’s still out there as a zombie company…)

      • chuckula
      • 7 years ago

      SGI built a beautiful headquarters and campus in the heart of Silicon Valley.
      Google loves using it now that SGI is no more.

    • ronch
    • 7 years ago

    Back in 2010 who would have though that Bulldozer would end up bulldozing nobody but AMD themselves?

      • Srsly_Bro
      • 7 years ago

      Bulldozer has been discussed longgggggggggggggggggggggggggggggggg before 2010……

        • ronch
        • 7 years ago

        That doesn’t invalidate my statement though. Many were optimistic about Bulldozer especially when AMD released more info about it back in 2010.

    • Forge
    • 7 years ago

    q[ “AMD is not actively pursuing a sale of the company or significant assets at this time,” the company stated.]q

    That’s completely true! Everyone already turned down the opportunity to buy the company, and there are no significant assets left to divest!

    Days like this, with news like this, makes me very sad. Soon I will be able to build a complete desktop PC with once-top-end components all made by companies that have augered in at maximum velocity.

    AMD Athlon XP 2500+
    Elpida or OCZ DDR
    AMD 760 chipset with the AMD 766 south (cause Via’s not dead yet, more the pity)
    3Dfx Voodoo5 5500 AGP
    Aureal A3D sound

    Any other components anyone can think of, that were great, but from companies that exceeded terminal velocity?

      • odizzido
      • 7 years ago

      I am not sure because I was young and not into computers as much back then, but you could run a quantum drive. My fireball actually still works to this day.

      • derFunkenstein
      • 7 years ago

      That would be a bitchin’ fast retro box.

      • MadManOriginal
      • 7 years ago

      You’re missing storage. I couldn’t think of any companies that exceeded terminal velocity, they mostly merged…but how about an original IBM Deathstar HDD? Certainly a product that reached terminal velocity.

    • Bensam123
    • 7 years ago

    There are a lot of doomsday sayers in this thread. This is actually a pretty good option for them. I really have no idea who would actually buy the building, but for a short term cash influx this remains a pretty good option. The important point to make here is they aren’t filing for bankruptcy they’re doing ALL of this and not filing for bankruptcy, which means they have a plan or they intend to fight this to the bottom.

    That may also mean that this isn’t nearly as bad as people are making it out to be, but they need to work through some contingencies in the meantime.

    A building is just a building. IF they start making more money in the future again they can simply buy the building back or they can build a new campus. They could even move their operations if they wanted (although that would be pricey). Just because they do one thing doesn’t mean they can’t do another in the future.

      • ronch
      • 7 years ago

      Well, it can’t feel good leasing one of your assets because you’re short on cash. It’s like going to the pawnshop to pawn your Rolex because you’re struggling. It could be the logical thing to do but I’m sure as heck it’s not fun.

        • Bensam123
        • 7 years ago

        Yeah… it’s most definitely a backwards step as far as how people view you, but one that is apparently needed at this time.

          • Captain Ned
          • 7 years ago

          Investors love sales/lease-back transactions. It turns a variable expense (occupancy + depreciation) into a fixed expense (lease + CAM). It’s not a backwards transaction in the eyes of the market makers.

            • Ringofett
            • 7 years ago

            Most retail companies lease virtually everything, too. Still feels like a canary in the coal mine, though. Nokia, another company circling the drain, did the same thing this year. Maybe market makers or specific types of investors would like it, but as an individual investor I don’t see how this is a good thing, liquidating big chunks of the companies assets to compensate for burning cash, especially when there’s nothing in the short-term pipeline to turn things around. Eventually, there’s nothing left to liquidate, and now the cash flow is slightly worse clear out until hell freezes over because the landlord expects an economic profit.

            I mean, hell, at least RIM has BB10’s launch. All AMD has is front row seats to the launch of Haswell. (maybe they can sell those too to raise cash?)

            • Bensam123
            • 7 years ago

            Steamroller… there is a lot riding on that. Vishera isn’t bad either, they just have a lot of flack still from Bulldozer. It’s going to take people awhile to get over that unless Steamroller jumps Intel’s latest.

      • Silus
      • 7 years ago

      You seem to be one of those people that no matter how bad it is, they always twist in a positive way…

      But there’s no positive way to twist this. AMD has no money, a huge debt and their business is non-profitable. Selling assets is the only thing they can do to make money and stay alive for a while longer, hoping that in that period they can make some sort of recuperation. Nokia is a good example of the same state of affairs, although they at least have some money in the bank and have the support of Microsoft (thus far), which is a far cry from AMD’s situation that has neither.

      Again, this is not good. You can hope for the best, but this is not good at all. Reality is harsh, but you really need to wake up.

        • just brew it!
        • 7 years ago

        I think Nokia’s deal with Microsoft may be in the “With friends like this, who needs enemies?” category…

        • Bensam123
        • 7 years ago

        I think jumping on bandwagon cynicism doesn’t help anyone. It generally makes the person doing it feel like a turd and companies that are doing bad don’t need the bad publicity. It’s like the guys that just give up when games get hard in LoL or even NS2. People give up way too easily in this day and age, so I commend people who don’t.

        It’s not like AMD has always been unprofitable too. They own ATI and ATI was making a pretty decent chunk before they were absorbed so we can assume they still are. There is still plenty of life left here.

    • OU812
    • 7 years ago

    AMD paid $270 million for the Austin campus back in 2008.

    [url<]http://www.bizjournals.com/austin/stories/2008/06/16/daily11.html[/url<] [quote<] Advanced Micro Devices Inc. opened its $270 million Southwest Austin campus Tuesday with a $1.5 million commitment to preserve open space. The Sunnyvale, Calif.-based company drew a lot of heat when it first announced its plans to build the campus in the environmentally-sensitive area, which sits over the Edwards Aquifer. [/quote<] Now AMD hopes someone will pay $150-200 million for it. More than likely the price will be at or below the low end as #1 AMD is desperate for cash and #2 AMD being the only tenant (and one who is poorly rated by S&P) the new owner may end up with an empty property if AMD goes out of business.

      • derFunkenstein
      • 7 years ago

      They bought right at the height of the “bubble” which is fairly typical for AMD. lol

    • sschaem
    • 7 years ago

    I posted detail on this, but in short AMD spend over 270 million for this…
    I guess this will be another “one time write off” of 120 million for Q4 or Q1.

    But guess AMD need to money to pay its CEO, and CFO, and COO, and CXX…. top $.

      • OU812
      • 7 years ago

      Actually AMD needs the money for day-to-day operations.

        • sschaem
        • 7 years ago

        And you dont think paying executives multimillion $ salary and bonuses isn’t part of the day to day operation ???
        AMD is burning over 200 million a quarter in operation.. not R&D budget.

        Not owning fabs, and that 200 million not including R&D.. do the math. AMD is being sucked dry from the inside.

          • ludi
          • 7 years ago

          You mean, by employees?

          AMD has roughly 11,000 of them. They don’t work for free.

    • SomeOtherGeek
    • 7 years ago

    Man… Like everyone says, it seems like they are scraping for cash. My question is what/why are they scraping for? It doesn’t look like they have anything to get the money back with. Not to be discouraging, but they do need to have a plan that is guaranteeing them a return. Or am I missing something?

      • Chandalen
      • 7 years ago

      <begin cynical person>Gotta make sure to pay the board of directors and high paid officers of the compnay before they sell it off to the lowest bidder</end cynical person>

        • jonjonjon
        • 7 years ago

        yea just like the wall street banks. those greedy ceo’s were willing to risk their own companies and the whole economy for that matter just for short term profit which equaled bigger bonuses. the sad thing is they all got away with it.

    • Sargent Duck
    • 7 years ago

    If AMD goes belly up, I wonder who would buy the graphics division (formely ATI). Intel? Would they spin it off to its own company much like they did with the Fab component?

      • Game_boy
      • 7 years ago

      Apple, Samsung or Qualcomm? (The latter already owns ATI’s former mobile graphics unit). Mobile processors is an area where any advantage, even just with patents, is worth buying right now.

      • Chrispy_
      • 7 years ago

      As long as it’s not Nvidia, all is well.

      • Bensam123
      • 7 years ago

      I think IF and before AMD goes under they’ll detach the graphics branch, rename them as their own company (possibly back to ATI), and then sink the rest of the ship. That branch still generates good money, they don’t necessarily need to sell it.

      I don’t know of many companies that would buy AMD graphics though. I’m guessing either Intel or Nvidia, but Nvidia doesn’t really need anything and would more then likely low ball them just to liquidate the company and get the tech.

      • ronch
      • 7 years ago

      I vote spin it off to its own separate company again.

    • flip-mode
    • 7 years ago

    This is escalating quickly.

      • ClickClick5
      • 7 years ago

      AMD will probably bounce back with something that they just pull out of the air one day. Say the Radeon 9xxx series just destroys Nvidia’s offering by a full 80%. Will it happen, probably not. But they have to have something somewhere in the cooker that will prove worthy. Otherwise they would just sell everything off, AMD will close, and the C*Os of the company will just go on their merry way with 400 mill in their pocket.

      • NeelyCam
      • 7 years ago

      I think they should’ve done this earlier. Asset light and all.

      I still think Rory Read is way over his head when it comes to technicals, but otherwise he seems to be doing OK. He’s handled the mass layoffs and uncertainty of further cuts poorly, resulting in decreased morale and brain-drain, and I think he’s killed off some of the wrong projects (Brazos [i<]Actual[/i<] 2.0). But he can certainly save a dime

        • MadManOriginal
        • 7 years ago

        Maybe that’s what AMD needs – a good businessman who can run a tight ship, as long as he lets the technical people do what they do best.

        • flip-mode
        • 7 years ago

        Go too asset light and you’re Rambus!

          • no51
          • 7 years ago

          But they haven’t started suing people… yet.

          • jdaven
          • 7 years ago

          Or ARM.

        • derFunkenstein
        • 7 years ago

        I think you reached that point of self contradiction nirvana. “He’s doing fine, other than where he’s screwing absolutely everything up”

          • NeelyCam
          • 7 years ago

          Let me add that “Maybe it was the outside consultants that told him to sell the campus”

    • FuturePastNow
    • 7 years ago

    This isn’t good. This is what Arizona did with its government buildings, rather than raise taxes.

    If this is true- and I do see AMD’s denial up there- it is truly the beginning of the end.

      • Deanjo
      • 7 years ago

      [url<]http://www.youtube.com/watch?v=9SZePxWr35k[/url<]

        • yogibbear
        • 7 years ago

        2nd most liked comment from 2 months ago is “Stop shooting me [i<]DAMMIT[/i<]", coincidence? I think not!

    • codedivine
    • 7 years ago

    Nokia recently did something similar where they sold and leased back their Espoo HQ.

      • just brew it!
      • 7 years ago

      …and Nokia is another company that is arguably circling the drain.

        • ludi
        • 7 years ago

        Actually, they’ve been gradually climbing back out of the hole:

        [url<]http://www.engadget.com/2012/10/18/nokia-q3-financials-2012/[/url<] They've banked their entire future on the Microsoft alliance, but so far 920 sales are going in the right direction.

    • MadManOriginal
    • 7 years ago

    Real men own campuses.

      • Flying Fox
      • 7 years ago

      They have not been real men since they ditched their fabs under Hector.

        • Game_boy
        • 7 years ago

        Yet that was possibly their only good business move of the last five years. AMD could not afford to develop 20nm on its own at this point.

        • ronch
        • 7 years ago

        Well, I had a friend watch Rory’s first speech at AMD and she said he’s gay. I’m not sure I agree, heck, I couldn’t care less as long as he can get AMD back into fighting shape.

    • yogibbear
    • 7 years ago

    Hmmm…. Google/Samsung please buy ATI off of AMD.

      • indeego
      • 7 years ago

      Google likely grows more than an entire AMD every quarter. I have not verified this and I’m lazy.

        • Geistbar
        • 7 years ago

        Depends on what you mean by “grow”. According to [url=http://en.wikipedia.org/wiki/Google<]wiki[/url<], Google made an annual profit of $9.737 billion in 2011. Dividing by four to get the average per-quarter gives $2.43425 billion*. AMD has a [url=https://www.google.com/finance?q=amd&ei=4wW3UJCVE-Pq0gHfZg<]market cap[/url<] of $1.4 billion. If you meant a growth in Google's market cap vs. AMD's market cap, well, that's a bit harder to say yes or no to -- Google [url=http://ycharts.com/companies/GOOG/market_cap<]seems to have[/url<] a bit of a sawtooth function going for that. Though year-year growth divided by four seems to work out to more than $1.4 billion. So, tl;dr They do, pretty much. * There is likely a lot of variance per quarter due to seasonal trends and all that, but like you, I'm lazy and just want to use the average.

          • eofpi
          • 7 years ago

          On the face of it, sure. But AMD paid rather more for ATI in 2006 than AMD’s current market cap, even if we subtract the huge writedown AMD took on the deal a few quarters later, giving a final acquisition value of around $2 billion for ATI. I’m too lazy to dig up market share figures from 6 years ago, but I seem to recall ATI having a smaller share then than they have now, which suggests they should be worth at least as much now as they were then.

          This would mean the ATI division is worth more than the combined AMD entity, and thus that AMD’s CPU business has negative market value. This actually makes sense, in a way, given the acquisition and bankruptcy clauses in the cross-licensing deal with Intel.

          edit: It seems that’s still below Google’s average quarterly income, so you’re still correct.

            • Geistbar
            • 7 years ago

            It’s worth noting that AMD has about [url=http://ycharts.com/companies/AMD/long_term_debt<]~$2 billion in long term debt[/url<]. I'm not a finance expert by any means, but I'd assume that that factors into their final market cap. If we assume a 1:1 ratio for such, that would leave their debt-less value at $3.4 billion. If we leave ATI at $2 billion, that'd leave the rest of the company valued at $1.4 billion, just with their debt dragging the whole value down.

            • Silus
            • 7 years ago

            In AMD’s current shape, ATI is not worth 2 billion…not even close. AMD as a whole is worth less than the debt they still have. No one will buy AMD completely, only portions of it and the graphics division (which is probably the most sought after) will be bought for much less than what AMD’s worth.

      • Mat3
      • 7 years ago

      Yes, please someone buy ATI and save them from the rest of AMD sinking ship.

      • rrr
      • 7 years ago

      Hmmm… brain surgeons, please transplant this guy some functioning brain.

    • SecretMaster
    • 7 years ago

    Seems like AMD is starting to scrape the bottom of the barrel on ways to get money. I’m usually no doomsayer, but this makes it seem like AMD is desperate for money.

      • cfroese
      • 7 years ago

      They might be desperate but selling their real estate and leasing it back is a strategy employed by many companies, even those making a lot of money. For example, most of the major banks in Canada did exactly this with their office towers years ago.

      It’s also a way to raise money without diluting any existing shares. The only catch is you can only do it once.

    • bthylafh
    • 7 years ago

    I give it six months before DAAMIT is in Chapter 11 reorganization.

      • Meadows
      • 7 years ago

      They are already reorganising.

        • bthylafh
        • 7 years ago

        They’re not in Chapter 11 yet, doofus.

          • 5150
          • 7 years ago

          Yeah, just chapter 8. Chapter 9 is when it starts to get really good.

          • Meadows
          • 7 years ago

          Gee, I wonder why. Maybe they don’t want to get there and instead employ preemptive steps.

            • bthylafh
            • 7 years ago

            You’re pretty thick this evening. Go back and read what I said again.

            • Bensam123
            • 7 years ago

            I think Meadows is inferring that companies that file for bankruptcy don’t actually try to dig themselves out and instead look for a easy way out. AMD is actually trying to get out of this, not just flop and pay off all the executives off.

            As such they may actually get out of this or when they do file for bankruptcy the company will go completely under, no reorganization.

            • bthylafh
            • 7 years ago

            Fallacy. Chapter 11 is for actual reorganization, so that you have a chance to save your company or at least parts of it.

            Chapter 7 is for when you’re shutting the thing down.

            • Bensam123
            • 7 years ago

            So what do you think the success rate is of companies that file for chapter 11 verse simply trying to reorganize by themselves before things get that far?

            You’re missing my point (I don’t think I can speak for Meadows on that one though).

            • Meadows
            • 7 years ago

            My point exactly.

            • JumpingJack
            • 7 years ago

            This is the SEC filing for the most recent cross license agreement:
            [url<]http://www.sec.gov/Archives/edgar/data/2488/000119312509236705/dex102.htm[/url<] There is a termination clause for either party entering bankruptcy (section 5.2 b). Of course, Ch 7 is a no brainer, no company wants Ch 7 as that means the end of the company, but even Ch 11 (for AMD anyway) could potentially mean the end of the company.

      • Srsly_Bro
      • 7 years ago

      Chapter 22 will soon follow.

        • MadManOriginal
        • 7 years ago

        Is that the crossfire version of Chatper 11?

          • Srsly_Bro
          • 7 years ago

          lol yes.

          And I gave you a minus 1. You’re welcome.

      • ronch
      • 7 years ago

      I give it six months before you pay a cool grand for your next chip. Thanks for the heads up though. I think I’ll grab an i5 for about $200 while I still can.

        • Srsly_Bro
        • 7 years ago

        lol u srs bro? In our society we frequently receive goods from one supplier and we don’t pay ridiculous prices. The market dictates the prices, Intel reacts to market demand and prices accordingly. You’re silly.

          • Ringofett
          • 7 years ago

          That monopolist pricing ends up at a higher equilibrium, though, is a (theoretical) given. Most of the extremely commonly consumed things society uses that’s a monopoly tend to be regulated in to the ground, like water utilities. My personal theory on why America’s internet generally blows compared to some global rich-world peers is the same thing; asides from geography, the “last mile” to our homes tends to have a monopoly on the single best pipe in to our homes, the cable. Therefore, we pay through the nose and get terrible customer service.

          All that said, ARM is coming up, and I for one have never believed bankruptcy would be bad for AMD. Wipe away some debt, reset some contracts, take out and shoot the management and board of directors, maybe get some fresh investment in. One things for sure; AMD’s a zombie as it is.

          Oh, and if intel did try to abuse monopoly pricing power too much (it surely would a little bit) then Intel probably knows it’d only be a huge boost both for whatevers left of AMD as well as the ARM ecosystem, as it’d make low-powered devices like tablets or netbooks even more attractive. So I agree with you generally, but can’t say it couldn’t give Intel supreme pricing power. If you want an x86 computer, they’d have ya by the balls.

            • MadManOriginal
            • 7 years ago

            We won’t go back to high-priced CPUs like the 90s, the market just won’t tolerate it. Intel can clearly make money with their current ASPs and margins so they don’t need to raise prices ‘just because they can’ either – what they need to do is continue to move volume. And the new enemy to their sales volume isn’t AMD – it never was, since AMD didn’t have the fab capacity when they had the performance lead, and even now if they contract out they are competing with many more companies for fab capacity – it’s ARM, and it’s a totally different battle.

            The only thing that might happen is some slowdown to the pace we’ve seen since Core 2 and the tick-tock strategy. Looking back, the performance, price/performance, and performance/watt improvements over the last 5-6 years are really staggering. I personally wouldn’t care if the pace of each tick or tock slowed from 1 year to 2-3 years, they’ve gotten above 1 year already anyway. That goes for desktop and laptop though, for mobile Intel will need to crank it up a notch.

            • eofpi
            • 7 years ago

            In the long run, in fields where things can still change reasonably quickly, the real cost of a monopoly isn’t higher prices. It’s slower innovation and thus slower ripple effects into the wider economy.

          • ronch
          • 7 years ago

          Yes, except I’m sure prices in your industry will be lower if it has more than one supplier.

        • Geistbar
        • 7 years ago

        AMD hasn’t had a significant downward effect on Intel’s prices for the past few years, I’d wager. We’ll probably see price increases of some magnitude as AMD continues to swirl down the drain, but, as far as the consumer is concerned, this is about as good timing as we could get. Just as one challenger (AMD) starts to wither, another one is preparing to enter the ring (ARM). ARM isn’t currently a major threat to x86, but if Intel lets themselves stagnate like they did in the years before Conroe, ARM will become that threat very quickly.

        I doubt that Intel is stupid enough to repeat the same mistake twice.

        • ludi
        • 7 years ago

        Right, Intel is selling i5 processors for $200 because they feel very threatened by the FX-8150. Riiiiggghhhhtttt.

          • jonjonjon
          • 7 years ago

          the FX-8350 is close enough that intel cant do anything crazy like charge $500-1000 for ivy bridge like they do with the sandy bridge-E cpu’s. all you have to do is look at the sandy bridge-E prices to see what all intel desktop cpu prices would look like if they had no competitor. on top of that you can be sure nvidia will be cashing in too. we will be paying $1000+ for a GTX 780 with no amd. when a company becomes a monopoly they usually don’t lower prices. im pretty sure that’s why governments try to prevent companies from becoming a monopoly.

          [url<]http://www.anandtech.com/bench/Product/701?vs=697[/url<]

    • The Dark One
    • 7 years ago

    Ah, I see you have the machine that goes [i<]ping[/i<]. This is my favourite. You see, we lease it back from the company we sold it to and [i<]that[/i<] way, it comes under the monthly current budget and not the capital account!

      • TurtlePerson2
      • 7 years ago

      For those that don’t know this is from a Monty Python sketch. I’d encourage you to Google it if you haven’t seen it. I hadn’t, until about five minutes ago.

        • MadManOriginal
        • 7 years ago

        Yeah, it is, and it’s funny. But it’s a legitmate business strategy to better utilize capital too. Lots of successful companies already do this but with everyone dramatically talking about AMD’s doom it automatically gets labeled as desperation. It’s got to be cheaper than issuing bonds and lets them keep operating the same as they were.

          • Captain Ned
          • 7 years ago

          Sale/lease-back arrangements have been done since approximately forever. There’s the cash influx from the sale and the lease payment may well be less than the annual depreciation/amortization expense on the complex, which will help earnings.

          Oh, and you’re not qualified!! (c.f. The Dark One).

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