Advanced Micro Devices (AMD) is no stranger to sale-leasebacks. The technique of freeing up cash by selling a property with an agreement to provide the buyer with a solid rental income stream, is a time-honored technique that has been in use by real estate buyers and sellers in the USA for more than sixty years.
Leaseback arrangements sell assets, convert them to cash, and still continue to provide the seller the benefits of occupancy in a reasonably seamless manner. AMD is looking for just such a buyer for its 58 acre southwest Austin property, and hopes to produce as much as $200-million in cash on a property the company built for approximately $270-million in 2008. A company spokesperson said Austin's favorable economic conditions make a good opportunity for AMD to "unlock the value of the real estate to fund operations".
The spokesperson said AMD has experience with this kind of arrangement, having successfully completed a sale-leaseback of a building in the Toronto area, and also AMD's headquarters in Sunnyvale, California previously. Advanced Micro Devices has retained the listing company CBRE to find potential buyers.
AMD has also hired JPMorgan Chase & Company to look for additional methods of raising cash, while stating clearly that AMD itself is not up for sale.
The stock market and analysts have responded positively to the announced sale due to concerns about the rate at which AMD has been burning through cash reserves during an extended global decline in PC sales. Additionally Advanced Micro Devices has substantially reduced staff in the Austin complex. The sale lease-back, however, is anticipated to have no impact on local operations or employees, according to the company spokesperson.
Rory Read, AMD's CEO, told investors that sales during the Thanksgiving holiday were encouraging, but he does not think the PC market overall will recover for several months. The PC market produces about 85% of AMD's business. The company expects to focus on CPUs (Central Processor Units) for computer game consoles in the future. AMD is still the world's second-largest maker of CPUs used in personal computers.
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