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Abu Dhabi Buys Stake In Sunnyvale-Based AMD


With oil prices surg­ing and U.S. stock prices slump­ing, chip mak­er Advanced Micro Devices Inc.‘s sale of an 8.1 per­cent stake to the Abu Dhabi gov­ern­men­t’s invest­ment arm rep­re­sents the lat­est plunge by a wealthy Mid­dle East­ern nation into a trou­bled U.S. cor­po­ra­tion.

It also rais­es fresh ques­tions about the appro­pri­ate­ness of Mid­dle East­ern firms own­ing large chunks of U.S. busi­ness­es that spe­cial­ize in advanced tech­nolo­gies.

Sun­ny­vale-based AMD, the world’s No. 2 micro­proces­sor mak­er, needs the $622 mil­lion invest­ment from the Mubadala Devel­op­ment Com­pa­ny to help lift the com­pa­ny out of a deep finan­cial slump.

AMD has lost more than $1.6 bil­lion so far this year, and has just $1.5 bil­lion in cash on hand as it works to pay down $5.3 bil­lion in debt. The finan­cial woes have caused AMD’s stock to fall more than 35 per­cent since the start of the year, a slide that has wiped out near­ly $4 bil­lion in share­hold­er wealth.

The infu­sion, announced Fri­day, is a nec­es­sary jolt for AMD is it hunts for mon­ey to fund its coun­terof­fen­sive against Intel Corp., the world’s largest chip mak­er, and amid a huge spike in invest­ments in U.S. com­pa­nies from Mid­dle East­ern nations.

Mid­dle East­ern invest­ments in U.S. com­pa­nies has increased more than five­fold in 2007, leap­ing from $4.5 bil­lion on 32 deals last year to near­ly $25 bil­lion on 42 deals so far this year, accord­ing to data com­piled by Thom­son Finan­cial.

The mon­ey invest­ed in the past two years is more than the entire total invest­ed from 1990 to 2005, accord­ing to the lat­est Thom­son data. Dur­ing that peri­od, $24.8 bil­lion in invest­ments were made in 258 deals.

Oil-rich coun­tries have been enriched fur­ther in recent months by a run-up in the price of a bar­rel of oil, which has been hov­er­ing in the $90 range while many U.S. stocks con­tin­ue to suf­fer from the hous­ing and lend­ing morass that’s led some banks to absorb bil­lions of dol­lars in loss­es.

The biggest deal so far this year involv­ing Mid­dle East­ern firms was Gen­er­al Elec­tric Co.‘s $11.6 bil­lion sale of its plas­tics divi­sion, com­plet­ed in August, to petro­chem­i­cals man­u­fac­tur­er Sau­di Basic Indus­tries Corp., a pub­lic com­pa­ny based in Riyadh that is 70-pecent owned by the Sau­di Ara­bi­an gov­ern­ment.

Firms based in the Unit­ed Arab Emi­rates, a fed­er­a­tion of sev­en oil-rich states, have invest­ed near­ly $10 bil­lion in real estate, finan­cial, pow­er gen­er­a­tion and oth­er types of com­pa­nies in the Unit­ed States.

Ear­li­er this year, Mubadala bought a 7.5 per­cent stake in the man­age­ment oper­a­tions of pri­vate-equi­ty firm Car­lyle Group for $1.35 bil­lion, and this week unveiled a part­ner­ship with mil­i­tary con­trac­tor Northrop Grum­man Corp. to col­lab­o­rate on aero­space and avi­a­tion tech­nolo­gies.

The deal with AMD makes the Abu Dhabi gov­ern­ment-run invest­ment fund AMD’s third-largest share­hold­er, accord­ing to AMD’s lat­est reg­u­la­to­ry fil­ings, a devel­op­ment that AMD vows will not trig­ger a review by the U.S. gov­ern­ment because it’s a minor­i­ty invest­ment and Mubadala will not get a board seat.

How­ev­er, some experts doubt that claim, cit­ing the sen­si­tiv­i­ty of AMD’s tech­nol­o­gy, which besides being used wide­ly in con­sumer per­son­al com­put­ers and cor­po­rate servers is also used in Defense Depart­ment com­put­ers and oth­er gov­ern­ment machin­ery.

John Reynolds, an attor­ney at Wiley, Rein & Field­ing in Wash­ing­ton, said the trans­ac­tion could face scruti­ny by Com­mit­tee on For­eign Invest­ment in the U.S., or CFIUS, a 12-mem­ber pan­el head­ed by the Trea­sury Depart­ment, because the U.S. gov­ern­ment is very inter­est­ed in acqui­si­tions by gov­ern­ment-run invest­ment funds, known as sov­er­eign wealth funds, such as Mubadala.

Chi­na, Sau­di Ara­bia and oth­er Mid­dle East­ern and Asian coun­tries have set up such funds, which con­trol an esti­mat­ed $2.5 tril­lion in assets.

In addi­tion, if AMD has gov­ern­ment con­tracts for clas­si­fied work, inter­est from CFIUS and Con­gress “is apt to be con­sid­er­able, even if the invest­ment is non-con­trol­ling,” Reynolds said.

Gen­er­al­ly, pas­sive invest­ments of less than 10 per­cent of a com­pa­ny’s shares do not trig­ger review by CFIUS. But that is not a hard-and-fast rule, Reynolds said, and an own­er­ship stake below 10 per­cent is not auto­mat­i­cal­ly shield­ed from review.
AMD shares slid 6 cents to $12.64 in Fri­day trad­ing.