AMD's shares leap 15 percent after Chartered deal

SAN FRANCISCO (Reuters) - Shares of Advanced Micro Devices (AMD.N) jumped nearly 15 percent after its chip foundry partner, Abu Dhabi's ATIC, offered to buy Singapore's Chartered Semiconductor CSMF.SI for $1.8 billion.

The rise suggested that AMD's just-established contract chip-making venture with ATIC, called Globalfoundries, might get the customers and technology needed to compete against global leaders like Taiwan's TSMC (2330.TW), analysts said.

But other analysts argued Globalfoundries still has a way to go to rival TSMC and No. 2 player United Microelectronics (2303.TW), which together control two-thirds of the $20 billion global chip foundry market.

Wedbush Morgan Securities' Patrick Wang said the deal does not fundamentally improve its technology and is unlikely to add materially to revenue until the second half of 2010. He expects AMD's shares to fall as much as 5 to 7 percent on Wednesday.

"I think it is risky," he said. "Chartered is just kind of a little militia fighting against a full-fledged army."

While the deal may give Globalfoundries access to customers like Broadcom Corp (BRCM.O), Marvell Technology Group Ltd (MRVL.O) and Texas Instruments Inc TXN.N, it will not speed up the foundry's transition to higher-end technologies, or improve its competitive position, Wang added.

"TSM leadership in the foundry business appears unassailable, with our checks indicating its process development efforts are a year or more ahead of the competition and support is coming from the strongest of potential partners including Intel, Qualcomm, NetLogic, and Nvidia," wrote JMP Securities analyst Alex Gauna.

"Beyond TSM, most companies we follow consistently name UMC as a key strategic second source."

Some analysts pointed to a Barclays stock upgrade as having triggered a share rally. Barclays Capital upgraded AMD stock to overweight from equal-weight, and raised its price target to $7.00 from $4.00, also citing improvement in overall personal computer demand.

"We view the (Chartered) transaction as a strategic positive for Global Foundries, which will acquire customer relationships and manufacturing capabilities in both 8-inch and 12-inch fabrication," Barclays analyst Tim Luke wrote.

"The ATIC/Chartered Semiconductor transaction is a net positive for AMD as it could likely help moderate loss levels at AMD consolidated, as Global Foundries broadens its customer base over time."

AMD's shares rose 66 cents, or 14.6 percent, to close at $5.19 on the New York Stock Exchange.

(Reporting by Clare Baldwin; editing by Ted Kerr, Gary Hill)