March 5 (Reuters) - Advanced Micro Devices has dumped its equity stake in GlobalFoundries Inc, three years after spinning off the company that makes most of its computer chips, in a move that frees it to strike manufacturing deals with other foundries.
The chipmaker will continue to outsource chip manufacturing to GlobalFoundries, but the Abu Dhabi-controlled foundry would no longer have exclusive manufacturing rights to some of AMDs chips.
AMD had spun off GlobalFoundries to Abu Dhabi government-owned Advanced Technology Investment Company (ATIC) in 2009 to cut back on manufacturing costs.
But an unfavourable supply deal and production issues at GlobalFoundries last year soured the relationship between the two.
On Sunday, ATIC, owned by Abu Dhabi investment fund Mubadala, said it bought the 9 percent stake held by Advanced Micro Devices in GlobalFoundries.
"This (AMD's) stake had been dwindling as GlobalFoundries Abu Dhabi parents had been making all capital injections while AMD opted out. This (deal) accelerates the fall to zero of AMD's position," Longbow analyst JoAnne Feeney said in a note.
As part of the agreement, AMD will make a payment of $425 million to GlobalFoundries to waive off the exclusivity deal, incurring a related charge of $703 million in the first-quarter.
"The remaining portion of the one-time charge is a $278 million non-cash expense for AMD's equity ownership transfer to Global Foundries," the company said on a call with analysts.
GlobalFoundries struggled to bring its 28nm chip fabrication on-line last year, prompting AMD to shift its production to rival TSMC.
AMD, a distant second to Intel Corp in selling microprocessors that are the brains of PCs, had seen production issues at GlobalFoundries hurt output last year.
The companies also signed a new supply agreement, which waives certain quarterly payments that AMD was to make to GlobalFoundries this year as part of the 2012 wafer supply agreement.
AMD shares were down nearly 3 percent at $7.27 in morning trading on the New York Stock Exchange.