AMD: IPO hopes on the rise
AMD posted a surprisingly strong earnings report this morning. The key is that the company actually had earnings. It was expected to post a loss, but strong demand for PC chips saved the day.
That report sparked a strong rally in computer chips today. And it has bolstered confidence that AMD will be able to successfully spin off its flash memory unit, known as Spansion. The business, saddled with falling prices and low margins, wasn't necessarily destined for IPO greatness. But the company's strong results have generated some respect among investors, who are more likely to take management's optimism about the memory business seriously. A new generation of flash memory products is designed to appeal to the cell phone market. In theory, there's no reason why the wireless sector, which is driving a turnaround in processors for wireless devices, can't provide a market for flash memory devices. But the products must be strong enough to resist commodification, at least for a little while.
If AMD can get the products right, Spansion could follow in the path of Freescale. Motorola spun off the Freescale wirless chip business in an IPO about a year ago, and the price of the stock has nearly doubled again.
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