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Tickers in this Article: AMD, INTC, GE, MGM
California-based AMD (NYSE:AMD) has spent a decade trying to play David to Intel's (Nasdaq:INTC) Goliath. I say "trying", because unlike the Bible story, in this tale the big guy just refuses to go down no matter how many rocks the scrappy AMD bounces off his skull.

The latest salvo is this battle for market share has AMD spinning off its manufacturing in an effort to stay lean.

Spin-Off Details
AMD plans to spin off its manufacturing arm into a company known as "Foundry Co". A pair of companies from Abu Dhabi have a stake in the venture. State-owned venture capital firm Advanced Technology Investment Company will invest $2.1 billion for a 55.6% stake, and Mubadala Development will drop just over $300 million to boost its position in AMD to more than 19%. (For related reading, check out Cashing In On The Venture Capital Cycle.)

This will give AMD more money and flexibility to battle against rival Intel. This gives AMD the breathing room to focus on execution.

Also, the fact that Mubadala Development is willing to get involved speaks volumes. For those unaware according to a July press release, General Electric (NYSE:GE) and Mubadala "will establish a jointly owned global commercial financial services business headquartered in Abu Dhabi". Also, Mubadala has linked up with MGM Mirage (NYSE:MGM) to create non-gaming related business opportunities. Mubadala Development is a big company that makes big moves. If it's interested in AMD, investors should pay attention. (To learn more, see The Pros And Cons Of Institutional Ownership.)

Spinnoff Won't Solve the Problem
While I think that this news is a net positive, and apparently others do too (the shares were up 8.5% in Tuesday's action despite a lousy market), AMD still has a long way to go. Going forward I continue to see a couple of challenges for AMD.

On the operational front, it must convince consumers that its technology is superior. The second problem I see is that plenty of people in the investment community have been burned by AMD. Its shares are down sharply from their 52-week high, and it could take several quarters to regain retail and institutional interest. AMD met or exceeded expectations for several quarters.

Bottom Line
AMD deserves credit for its long battle against a larger rival. The spinoff is certainly a positive, but I think AMD will have to prove itself on the earnings front if it has any hope of slaying its age-old foe.

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