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AMD, Fujitsu Launch New Company

SAN FRANCISCO -- AMD Monday said it will establish a $2.5 billion new Flash memory semiconductor company with longtime memory partner Fujitsu.

Under a "memorandum of understanding," the new company will be called FASL LLC and headquartered in Sunnyvale, California. A Japan headquarters will be located in Tokyo including an R&D facility.

The new company is an offshoot of Fujitsu AMD Semiconductor Limited (FASL) -- a 50-50 partnership that Sunnyvale, Calif.-based AMD has with the Tokyo-based concern The holding company runs a major Flash memory chip production facility in Aizu-Wakamatsu, Japan. As part of the deal, AMD will take a 60 stake. Fujitsu will maintain 40 percent.

AMD CEO Hector De Ruiz said FASL LLC is expected to begin operations in the third quarter of this year and will file paperwork to become a publicly traded company.

"Almost overnight, we've created one of the top flash memory companies in the world," AMD CEO Hector De Ruiz told investors during the conference call. "Customers are looking for a strong, collaborative partner in the Flash memory category, and that's what we intend to create with this new company."

The new company also has a marketing arrangement whereby the new company will sell Flash memory products through AMD and Fujitsu and their respective sales forces. Ruiz said new FASL products and brands will be announced closer to the launch date.

Bertrand Cambou, who was recently promoted to senior vice president at AMD, has been tapped to head the new company. Cambou was previously a group vice president at AMD and has been running the memory group since January 2002. Each company will be able to appoint a chairman of the board on a yearly rotating basis starting with Fujitsu. Masamichi Ogura, Fujitsu corporate senior vice president & group president, Electronic Devices Business Group will be the first chairman. The board of directors consists of ten members, six appointed by AMD and four appointed by Fujitsu. FASL LLC's financial results will be consolidated in AMD's financial statements for the time being.

Approximately 7,000 employees will be split worldwide between AMD's Flash memory group including its Fab 25 in Austin, Texas, R&D center known as the Submicron Development Center (SDC) in Sunnyvale, California, final Flash memory assembly and test operations in Thailand, Malaysia, and China.

Fujitsu said it plans to contribute its Flash memory business division and its Fujitsu Microelectronics (Malaysia) (FMM) final assembly and test operations.

"By joining together in a more comprehensive alliance, we can improve our market position through consolidated research and development efforts, as well as benefit from greater access to each other's technology and manufacturing expertise," Masamichi Ogura said in a statement.

The long-rumored deal allows the No. 2 chipmaker to maintain more control over production and sales, especially in Europe, and separate its semiconductor business with its memory business. Two-thirds of AMD's revenue comes from its processors. One-third comes from its Flash memory business.

"This is only going to help AMD and Fujitsu become as stronger competitor and move up in market position," In-Stat/MDR analyst Kevin Krewell told internetnews.com. "They are in better shape to challenge Intel because they appear as one stronger brand, rather than as two lesser brands."

For more than a year, AMD has been looking to split into two companies, but the timing with Fujitsu has not been just right. Then two weeks ago, Credit Suisse First Boston analyst Tim Mahon reported the spinout of AMD's flash business was "imminent." There are also reports that AMD is already alerting employees about changes that would happen in a few days.