May 6, 2008 / 6:13 PM / 12 years ago

AMD shares jump on restructuring optimism

SAN FRANCISCO (Reuters) - Advanced Micro Devices Inc AMD.N shares jumped more than 12 percent on Tuesday on investor optimism that the beleaguered chipmaker could soon announce its long-awaited strategy to revamp manufacturing to cut costs.

An AMD 790FX chip is seen in an undated handout photo. REUTERS/Advanced Micro Devices/Handout

The stock’s rise, which adds to a 6 percent gain on Monday, also comes after a new filing in AMD’s 2005 antitrust lawsuit against larger rival Intel Corp (INTC.O) that added to AMD’s list of allegations that Intel pressured and paid PC makers not to buy AMD chips.

“There’s AMD’s ongoing restructuring, probably some data we’re due to get on the asset-light strategy, and the lawsuit is becoming better understood,” American Technology Research analyst Doug Freedman said.

It has been a little more than a year ago now that AMD Chief Executive Hector Ruiz announced that the company would be retooling its manufacturing strategy to cut costs and ease cash flow problems.

In its most recent earnings conference call with analysts, Ruiz hinted that a detailing of that strategy would come sooner rather than later. Options include separating AMD’s chipmaking plants, or forging a joint venture or partnership with a contract chipmaker, analysts have said.

“What’s been bandied about is the asset-light part which could be the partial separation of AMD’s design and manufacturing arms,” said CRT Capital Group analyst Ashok Kumar. “On the manufacturing side, they would likely partner with Chartered (Semiconductor) CSMF.SI CHRT.O but maintain a 51 percent ownership of any such venture.”

AMD also holds its annual stockholder meeting in Austin, Texas, on Thursday morning. Those events are often short on news, but Kumar said it was at least possible that AMD could detail specifics of its asset-light manufacturing strategy.

“Maybe there is some light at the end of the tunnel,” Kumar said.

The latest filing by AMD on the Intel-AMD case was made in U.S. Federal District Court in Delaware on May 1 and unsealed on Monday.

“Investors who tend to short this stock were not applying any asset value to this lawsuit,” Freedman said. “I think it would be prudent to apply at least some value.”

Shorting a stock is a bet made by investors that a company’s shares will fall.

AMD stock rose 12 percent, or 78 cents, to $7.31 in afternoon trading as 42.2 million shares changed hands, compared with the 30-day average volume of 23.3 million shares. More than 41 million shares traded on Monday and the stock rose 6 percent.

“I don’t think this is naked buying, I would think there has to be some short-covering going on,” Freedman said.

Still, shares of AMD are down some 40 percent in the last 12 months, compared with a 21 percent decline in the Philadelphia Stock Exchange Semiconductor Index .SOXX in the same time period. Intel shares are up more than 7 percent in the last 12 months.

Editing by Maureen Bavdek

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