AMD Lowers Wafer Order from Globalfoundries and Suffers US$320 Million Penalty
AMD has just announced that it has lowered wafer purchase commitments with Globalfoundries for the closing quarter of 2012. This move will result in a termination penalty of US$320 million that AMD will have to pay out in several installments.
According to Engadget, AMD initially agreed to purchase US$500 million worth of silicon during the fourth quarter of 2012; however, it will only spend US$115 million instead under the new agreement with Globafoundries. This move by AMD is seen as an exercise to avoid having excess inventory, which would entail further write-downs in the near future.
As a result of this move, AMD is saddled with a termination fee of US$320 million; the company also stated that the termination fee will result in a one-time charge of approximately US$165 million that will be recorded in their fourth quarter results. It seems that AMD's prospects keep turning for the worse as we reported earlier that AMD has suffered an 18% decline in their semiconductor revenue, down from its 2011 revenue of roughly US$6.4 billion to the current estimated 2012 revenue of US$5.3 billion.
In its official press statement, the company said they expect "...to return to free cash flow generation in the second half of 2013.". Just last month, AMD announced that it was selling its campus to raise cash to the tune of US$$200 million. To view the official press release from AMD, please visit this link.