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2009 ANNUAL REPORT ON FORM 10-K

Table of contents

  • Page 1
    2009 ANNUAL REPORT ON FORM 10-K

  • Page 2

  • Page 3
    ... year-from industry-leading graphics products, to visually-richer client platforms, to higher-performance six-core server processors. With the formation of GLOBALFOUNDRIES, we made a game-changing move helping to unlock AMD from the capital-intensive burden of funding the leading-edge manufacturing...

  • Page 4
    ...without limitation, the following: (1) that Intel Corporation's pricing, marketing and rebating programs, product bundling, standard setting, new product introductions or other activities negatively impact our plans; (2) that we may be unable to develop, launch and ramp new products and technologies...

  • Page 5
    ... For the fiscal year ended December 26, 2009 OR SECTION 13 OR 15(d) OF THE ' TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number 001-07882 ADVANCED MICRO DEVICES, INC. (Exact name of registrant as...

  • Page 6

  • Page 7
    Advanced Micro Devices, Inc. FORM 10-K For The Fiscal Year Ended December 26, 2009 INDEX PART I ...ITEM 1. ITEM 1B. ITEM 2. ITEM 3. ITEM 4. BUSINESS ...UNRESOLVED STAFF COMMENTS ...PROPERTIES ...LEGAL PROCEEDINGS ...SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...ITEM 1A. RISK FACTORS ...1 1 ...

  • Page 8

  • Page 9
    ... for our products and technologies (and the mix thereof); (2) our expected market share; (3) our expected product costs and average selling price; (4) our overall competitive position and the competitiveness of our current and future products; (5) our ability to introduce new products, consistent...

  • Page 10
    ... markets and chipsets for desktop and notebook PCs, professional workstations and servers; and (ii) graphics, video and multimedia products for desktop and notebook PCs, including home media PCs, professional workstations and servers and technology for game consoles. We are one of two companies...

  • Page 11
    ... Wafer Supply Agreement governs the terms by which we purchase products manufactured by GF. For more information about the Wafer Supply Agreement, please see page 15. Recent Developments On December 18, 2009, ATIC International Investment Company, or ATIC II, an affiliate of ATIC, acquired Chartered...

  • Page 12
    ... and executive offices are located at One AMD Place, Sunnyvale, California 94088, and our telephone number is (408) 749-4000. References in this report to "AMD," "we," "us," "management," "our," or the "Company" means Advanced Micro Devices, Inc. and our consolidated majority-owned subsidiaries...

  • Page 13
    .... We focus on continually improving power management technology, or "performance-per-watt." To that end, we offer processors and chipsets with features that are designed to reduce system level energy consumption, with multiple levels of lower clock speed and voltage states that can significantly...

  • Page 14
    ..., the six-core AMD Opteron processors leverage existing platform infrastructure and a low-cost, power-efficient DDR-2 memory architecture, a memory technology used for high speed storage of working data, which can help lower system acquisition costs for end users. High performance computing (HPC...

  • Page 15
    ... Neo and AMD Athlon Neo X2 processors. We design our mobile processor products for high performance, long battery life and wireless support. AMD Turion X2 Ultra Mobile Processors are our most advanced dual-core processor family for notebook PCs. This technology supports leading-edge graphics for the...

  • Page 16
    ... switches. This platform enables increased performance for virtualized and multithreaded embedded applications and advanced power management features. Chipset Market The chipset sends data between the microprocessor and input, display and storage devices, such as the keyboard, mouse, monitor, hard...

  • Page 17
    ... customers generally use our graphics to increase the speed of rendering images and to improve image resolution and color definition. Our products include 3D graphics and video and multimedia products developed for use in desktop and notebook PCs, including home media PCs, professional workstations...

  • Page 18
    ...performance, power consumption, form factor and cost. In January 2009, we launched our next generation of graphics processors for notebooks, the ATI Mobility Radeon HD 4000 series of products. These products bring the power of desktop graphics to mobile users, allowing users to have life-like gaming...

  • Page 19
    ...and AMD Sempron. Our Notebook PC brands for microprocessors are AMD Turion, AMD Athlon and AMD Sempron. AMD Athlon processors and AMD Turion processors are sometimes marketed using the "Neo" model designator. Our server and workstation brand for microprocessors is AMD Opteron. We also sell low-power...

  • Page 20
    ... and domestic manufacturers of servers and workstations, desktop and notebook PCs, and PC motherboards. Under our standard terms and conditions, OEMs do not have a right to return our products other than pursuant to the standard limited warranty. In 2009, Hewlett-Packard Company accounted for more...

  • Page 21
    ... before us. Using more advanced process technology can contribute to lower product manufacturing costs and improve a product's performance and power efficiency. We expect intense competition from Intel to continue. In November 2009, Intel and AMD announced a comprehensive agreement to end all...

  • Page 22
    ... cost significantly less than discrete GPUs while offering acceptable graphics performance for most mainstream PC users. Intel Corporation manufactures and sells integrated graphics chipsets bundled with their microprocessors and is a dominant competitor in this market. Competition in the Graphics...

  • Page 23
    ... research and development activities for our products in the United States with additional design and development engineering teams located in Canada, India, Germany, Singapore, China, Japan, Malaysia, and Taiwan. Prior to the formation of GF in March 2009, we conducted microprocessor manufacturing...

  • Page 24
    ... power consumption and lower per unit manufacturing costs. We are currently in the process of qualifying 28 nm process technology for certain products. We outsource board-level graphics product manufacturing to third-party manufacturers. These include Foxconn and PC Partner with locations in China...

  • Page 25
    ... granted to the other a non-exclusive license under patents filed by a party (or are otherwise acquired by a party) within a certain number of years following the effective date of the agreement. Under the agreements with GF, in 2009 we assigned approximately 3,000 patents and approximately 1,000...

  • Page 26
    ... its aggressive business practices may limit our ability to compete effectively. Intel Corporation has dominated the market for microprocessors for many years. Intel's market share, margins and significant financial resources enable it to market its products aggressively, to target our customers and...

  • Page 27
    ... new products or technologies, such as "Llano" we may lose competitive positioning, which could cause us to lose market share and require us to discount the selling prices of our products. Delays in developing or qualifying new products can also cause us to miss our customers' product design windows...

  • Page 28
    ... capacity also increased, the integration process and the increased customer base could lead to delays or disruptions in manufacturing our products, which would adversely impact our business. In addition, pursuant to the Wafer Supply Agreement between us and GF, we compensate GF on a cost plusbasis...

  • Page 29
    ... our wafer manufacturers and subcontractors to ensure adequate product supply to respond to customer demand. If we move production of our products to new manufacturers or if current manufacturers implement new process technology or design rules, any transition difficulties may result in lower yields...

  • Page 30
    ... our graphics and chipset products. We cannot be certain that GF or other third-party foundries will be able to develop, obtain or successfully implement leading-edge process technologies needed to manufacture future generations of our products profitably or on a timely basis or that our competitors...

  • Page 31
    ... may decrease our cash balances. If new competitors, technological advances by existing competitors or other competitive factors require us to invest significantly greater resources than anticipated in our research and development efforts, our operating expenses would increase. If we are required to...

  • Page 32
    ...into certain types of transactions with affiliates; and consolidate or merge or sell our assets as an entirety or substantially as an entirety. In addition, the guarantee agreement related to the euro 700 Million Term Loan Facility Agreement for AMD Fab 36 Limited Liability Company & Co. KG (Fab 36...

  • Page 33
    ... effect on us. Collectively, our top five customers accounted for approximately 50 percent of our net revenue in 2009. We expect that a small number of customers will continue to account for a substantial part of revenues of our microprocessor and graphics businesses in the future. During 2009...

  • Page 34
    ... a more advanced process technology can contribute to lower product manufacturing costs and improve a product's performance and power efficiency. Some competitors may have greater access or rights to companion technologies, including interface, processor and memory technical information. Competitive...

  • Page 35
    ..., errors will not be found in new products or releases after commencement of commercial shipments in the future, which could result in loss of or delay in market acceptance of our products, material recall and replacement costs, delay in recognition or loss of revenues, writing down the inventory...

  • Page 36
    ... design and development services, as well as royalties paid to us by Nintendo and Microsoft. Our royalty revenues are directly related to the sales of these products and reflective of their success in the market. If Nintendo or Microsoft does not include our graphics technology in future generations...

  • Page 37
    ... than the manufacturing code date. Some agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. We defer the gross margins on our sales to distributors, resulting from both our deferral of revenue and related product costs, until...

  • Page 38
    .... Currently, GF manufactures our products in facilities that are located in Germany. Nearly all product assembly and final testing of our microprocessor products is performed at manufacturing facilities in China, Malaysia and Singapore. In addition, our graphics and chipset products are manufactured...

  • Page 39
    ... adverse effect on our business, financial condition, results of operations and cash flow. In addition, the majority of our product sales are denominated in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the local currency can cause increases or decreases in the cost of...

  • Page 40
    ... of our products or to increase the costs of selling some of our products or could damage our reputation. The award of damages, including material royalty payments, or the entry of an injunction against the manufacture and sale of some or all of our products, would have a material adverse effect on...

  • Page 41
    ... specification there is the potential for certain of our microprocessor, chipset and GPU products, as incorporated in desktop and mobile PCs, being excluded from the EU market. While we have budgeted for foreseeable associated expenditures, we cannot assure you that future environmental legal 33

  • Page 42
    ... or current reports under the Securities Exchange Act of 1934 that remain unresolved. ITEM 2. PROPERTIES At December 26, 2009, we owned principal research and development, engineering, manufacturing, warehouse and administrative facilities located in the United States, Canada, China, Singapore and...

  • Page 43
    ... market by engaging in anti-competitive financial and exclusionary business practices that in effect limit Intel's customers' ability and/or incentive to deal with us. On November 11, 2009, we entered into a comprehensive settlement agreement with Intel. Pursuant to the settlement agreement, Intel...

  • Page 44
    ... complaint on August 7, 2006. On January 30, 2009, ATI, on behalf of itself, AMD, and, ATI Technologies Systems Corp., ATI Research Silicon Valley Inc., and ATI Research, Inc. (all former indirect-subsidiaries of AMD) (collectively "ATI"), executed a settlement agreement relating to the claims...

  • Page 45
    ... used in the semiconductor industry in the United States in the wafer fabrication process prior to 1979. In 1991, we received Final Site Clean-up Requirements Orders from the California Regional Water Quality Control Board relating to the three sites. We have entered into settlement agreements...

  • Page 46
    ... OF EQUITY SECURITIES Our common stock (symbol "AMD") is listed on the New York Stock Exchange. On February 1, 2010, there were 7,652 registered holders of our common stock. The following table sets forth on a per share basis the high and low intra-day sales prices on the New York Stock Exchange for...

  • Page 47
    ... Index from December 26, 2004 through December 26, 2009. The past performance of our common stock is no indication of future performance. Comparison of Cumulative Five Year Total Return $150 $100 $50 $0 2004 2005 2006 2007 2008 2009 Advanced Micro Devices, Inc. S&P 500 Index S&P 500...

  • Page 48
    ... 2006(1)(2) 2005(1)(2) Net revenue ...Cost of sales ...Gross margin ...Research and development ...Marketing, general and administrative ...In-process research and development ...Legal settlement(3) ...Amortization of acquired intangible assets and integration charges ...Impairment of goodwill...

  • Page 49
    ... of 53 weeks whereas 2009, 2008, 2007 and 2005 consisted of 52 weeks. As a result, 2006 is not fully comparable to the other periods presented. Includes the effects of the retrospective adoption of new accounting guidance for convertible debt that may be settled in cash upon conversion, as well as...

  • Page 50
    ...graphics, video and multimedia products for desktop and notebook PCs, including home media PCs, professional workstations and servers, and technology for game consoles. • In March 2009, we formed GLOBALFOUNDRIES (GF), a manufacturing joint venture, with Advanced Technology Investment Company LLC...

  • Page 51
    products, especially our six-core AMD Opteron processors for servers, which we introduced in June 2009 and our ATI Radeon 5000 series of GPUs, which we introduced in September 2009. We also settled the AMD-Intel litigation in November 2009, resulting in a new patent cross-licensing agreement, ...

  • Page 52
    ... with a new business model, compelling products and stronger customer demand in an improved economic environment. In addition, beginning in the first quarter of 2010, we will no longer consolidate the operations of GF. As a result, we expect that in the future, our consolidated cost of sales will be...

  • Page 53
    ... a rate of 12 percent per year, compounded semiannually, of the initial purchase price per such share. The accreted value accrues daily from the Closing and is taken into account upon certain distributions to the holders of Class B Preferred Shares or upon conversion of the Class B Preferred Shares...

  • Page 54
    ...to a Shareholders' Agreement, a Funding Agreement and a Wafer Supply Agreement, certain terms of each of which are summarized in Part I, Item 1-Business, above. Based on the structure of the GF transaction and the guidance on accounting for interests in variable interest entities during 2009, GF was...

  • Page 55
    ... balances to approximate the lower of our standard manufacturing cost or market value. Among other factors, management considers forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining obsolescence...

  • Page 56
    ...of 2008, in conjunction with the integration of ATI's operations into ours, we began reviewing and addressing operating performance using the following three reportable segments: • the Computing Solutions segment, which included microprocessors, chipsets and embedded processors and related revenue...

  • Page 57
    ..., chipsets and embedded processors and related revenue; and the Graphics segment, which included graphics, video and multimedia products and related revenue as well as revenue received in connection with the development and sale of game console systems that incorporate our graphics technology...

  • Page 58
    ... a 13 percent increase in unit shipments. The average selling price decreased primarily due to a decrease in the average selling price of microprocessors, especially for notebook PCs, and a greater mix of chipsets, which typically have a lower average selling price. Competitive market conditions and...

  • Page 59
    ...graphics technology. Revenue from the sales of GPU products increased due to an increase in unit shipments of GPUs while the GPU average selling price was approximately flat. GPU unit shipments increased in 2008 compared to 2007 due to demand for new products, including the ATI Radeon HD 4000 series...

  • Page 60
    ... million increase in cost of sales because of higher GPU unit shipments and increased research and development and marketing, general and administrative expenses, which increased for the reasons set forth under "Expenses" below. Foundry Foundry net revenue was $1.1 billion in 2009. Foundry operating...

  • Page 61
    .... 2009 2008 2007 (In millions except for percentages) Cost of sales ...Gross margin ...Gross margin percentage ...Research and development ...Marketing, general and administrative ...Legal settlement ...Amortization of acquired intangible assets and integration charges ...Impairment of goodwill and...

  • Page 62
    ... to cost of sales. However, these credits will have a favorable impact on the amounts that we pay GF pursuant to the Wafer Supply Agreement. Pursuant to Wafer Supply Agreement between AMD and GF, we agreed to compensate GF on a cost-plus basis, which results in increased per unit manufacturing costs...

  • Page 63
    ... with the formation of GF. Graphics' marketing, general and administrative expenses increased due to higher marketing and cooperative advertising costs related to the launch of new products. Legal Settlement On November 12, 2009, we entered into an agreement with Intel to end all outstanding legal...

  • Page 64
    ...AMD Imageon media processor brand and the right to continue selling the products that were part of the Handheld business unit. We intend to support our existing Handheld products and customers through the current product lifecycles. We do not intend to develop any new Handheld products or engage new...

  • Page 65
    ...our Graphics segment was lower primarily because of intense pricing competition with Nvidia throughout 2007, which required an increase in sales and marketing activities to a greater extent than we previously forecasted. In addition, we had invested in the development of new graphics technologies to...

  • Page 66
    ... forecasted sales to those companies employing our technology. In addition, our Handheld business was dependant on a small number of mobile handset customers for its revenues. During 2007, one handset customer experienced severe competition and eroding market share for its consumer handset products...

  • Page 67
    ... site and at sales offices worldwide. With respect to our Sunnyvale, California site, we entered into a sublease agreement for a portion of these facilities with Spansion Inc. On March 1, 2009, Spansion Inc. filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code...

  • Page 68
    ... 2007 upon completion of construction. This was partially offset by a $3 million increase in capitalized interest expense related to the conversion of the Fab 38 facility in Dresden, Germany. In the first quarter of 2009 we retrospectively adopted new accounting guidance for certain convertible debt...

  • Page 69
    ... foreign currency exchange contracts, a gain of $28 million on the sale of certain Handheld assets, and a $25 million gain from a class action legal settlement with DRAM manufacturers related to DRAM pricing. These gains were partially offset by a $17 million charge for real estate transfer taxes in...

  • Page 70
    ... Employee Stock Purchase Plan for the year ended December 29, 2007 was allocated in our consolidated statements of operations as follows: 2009 2008 (In millions) 2007 Cost of sales ...Research and development ...Marketing, general and administrative ...Total stock-based compensation expense ...Tax...

  • Page 71
    ...-based compensation expenses associated with the cancelled options are being recognized over the new vesting periods of the replacement options which range from one to two years. International Sales International sales as a percentage of net revenue were 87 percent in 2009 and 88 percent in 2008 and...

  • Page 72
    ... IBM Credit LLC, IBM United Kingdom Financial Services Ltd and IBM Factoring (CHINA) Co., Ltd (IBM parties). Under these arrangements, we sell to the IBM parties certain accounts receivable of our distributor customers. Because we do not recognize revenue until the distributors sell our products to...

  • Page 73
    ... a decrease of $722 million in accounts payable and accrued liabilities primarily reflecting the effects of our cost cutting efforts and a decrease of $101 million in accounts receivable. During 2008, IBM collected approximately $221 million from our customers pursuant to the financing arrangements...

  • Page 74
    ... Development Company; $78 million from the sale of stock under our Employee Stock Purchase Plan and the exercise of employee stock options; and $223 million of capital investment grants and allowances received from the Federal Republic of Germany and the State of Saxony, primarily for the Fab...

  • Page 75
    ...Convertible Senior Notes due 2012 ...6.00% Convertible Senior Notes due 2015(1) ...8.125% Senior Notes due 2017(1) ...Fab 36 Term Loan ...AMD China Revolving credit line... increase significantly because of our commitments under the Wafer Supply Agreement to purchase wafers from GF. Of the amounts set ...

  • Page 76
    ...42 per share. This initial conversion rate will be adjusted for certain anti-dilution events. In addition, the conversion rate will be increased in the case of corporate events that constitute a fundamental change (as defined in the 5.75% Indenture) of AMD under certain circumstances. Holders of the...

  • Page 77
    ... permitting restrictions on the ability of our subsidiaries to pay dividends or make other distributions to us; using the proceeds from sales of assets; entering into certain types of transactions with affiliates; and consolidating, merging or selling our assets as an entirety or substantially as an...

  • Page 78
    .... AMD China Revolving Credit Line In November 2009, AMD Products (China) Co. Ltd. (AMD Products) entered into a one year revolving credit agreement in the amount of RMB200 million ($30 million based on a foreign exchange rate as of December 26, 2009) with China Merchant Bank to finance the working...

  • Page 79
    ... Wafer Supply Agreement to purchase wafers from GF. Receivable financing arrangement In March 2008, we and one of our subsidiaries, AMD International Sales & Service, Ltd. (AMDISS), entered into Sale of Receivables-Supplier Agreements with IBM Credit LLC (IBM Credit) and IBM United Kingdom Financial...

  • Page 80
    ... estimates are based upon forecasted rents to be charged by BAC in the future and are subject to change based upon the actual usage of the facility by the tenants and foreign currency exchange rates. In December 2007, AMTC entered into a euro denominated revolving credit facility, pursuant to which...

  • Page 81
    ... that our Digital Television business unit was not directly aligned with our core strategy of computing and graphics market opportunities and we decided to divest this business unit. We performed an interim impairment test of goodwill and acquired intangible assets during 2008. We concluded that the...

  • Page 82
    ... outside of our control. We believe the current credit market difficulties do not have a material impact on our financial position. However, a future degradation in credit market conditions could have a material adverse effect on our financial position. During 2008, the market conditions for ARS...

  • Page 83
    ... dollar, while sales of products are primarily denominated in U.S. dollars. As a consequence, movements in exchange rates could cause our foreign currency denominated expenses to increase as a percentage of net revenue, affecting our profitability and cash flows. We use foreign currency forward...

  • Page 84
    ... December 26, 2009 December 27, 2008 Average Estimated Average Estimated Notional Contract Fair Value Notional Contract Fair Value Amount Rate Gain (Loss) Amount Rate Gain (Loss) (In millions except contract rates) Foreign currency forward contracts: Japanese yen ...Canadian Dollar ...Euro ...Total...

  • Page 85
    ... DATA Advanced Micro Devices, Inc. Consolidated Statements of Operations Three Years Ended December 26, 2009 2009 2008* 2007* (In millions, except per share amounts) Net revenue ...Cost of sales ...Gross margin ...Research and development ...Marketing, general and administrative ...Legal settlement...

  • Page 86
    Advanced Micro Devices, Inc. Consolidated Balance Sheets December 26, December 27, 2009 2008* (In millions, except par value amounts) ASSETS Current assets: Cash and cash equivalents ...Marketable securities ...Total cash and cash equivalents and marketable securities ...Accounts receivable, net ...

  • Page 87
    Advanced Micro Devices Inc. Consolidated Statements of Stockholders' Equity Three Years Ended December 26, 2009 (In millions) Number Capital in of excess of Treasury shares Amount par value stock December 31, 2006 ...547 $ 5 $5,409 $(93) Comprehensive loss: Net loss attributable to AMD common ...

  • Page 88
    ... ...Impairment of goodwill and acquired intangible assets ...Gain on sale of 200 millimeter equipment ...Amortization of foreign grant and allowance income ...Compensation recognized under employee stock plans ...Non-cash interest expense ...Provision (benefit) for deferred income taxes ...Other...

  • Page 89
    ... Company provides processing solutions for the computing and graphics markets. AMD supplies 3D graphic, video and multimedia products and chipsets for personal computers, or PCs, including desktop and notebook PCs, professional workstations, and servers and products for consumer electronic devices...

  • Page 90
    ...product cost. Gross margin resulting from the deferral of both revenue and related product costs on shipments to distributors is revalued at the end of each fiscal period based on the change in inventory units at distributors, latest published prices, and latest product costs. The Company also sells...

  • Page 91
    ... The required reserves, if any, may change in the future due to new developments in each matter or changes in circumstances, such as a change in settlement strategy. Changes in required reserves could increase or decrease the Company's earnings in the period the changes are made (see Notes 17 and 19...

  • Page 92
    ...-year limited warranty to end users for microprocessor products that are commonly referred to as "processors in a box" and for ATI branded PC workstation products and has offered extended limited warranties to certain customers of "tray" microprocessor products and/or workstation graphics products...

  • Page 93
    ... Warrants issued by the Company to WCH in connection with the GF transaction. The Warrants became exercisable for a nominal consideration upon the July 24, 2009 public ground-breaking of GF's planned manufacturing facility in New York. Accordingly, the 35 million shares of AMD common stock issuable...

  • Page 94
    ... options, restricted stock awards and shares issuable upon the conversion of convertible debt. The following table sets forth the components of basic and diluted income (loss) attributable to AMD common stockholders per share: Three Years Ended December 26, 2009 2009 2008 2007 (In millions, except...

  • Page 95
    ... 11, "Accounting Change-Convertible Debt Instruments"). NOTE 3: GLOBALFOUNDRIES On March 2, 2009, the Company consummated the transactions contemplated by the Master Transaction Agreement among the Company, Advanced Technology Investment Company LLC (ATIC), a limited liability company established...

  • Page 96
    ... ATIC owned 100% of the Class B Preferred Shares and 100% of the Class A Notes and Class B Notes. In November 2009, upon the settlement of the Intel litigation (discussed in Note 12) and the execution of a patent cross license agreement between the Company and Intel, the requirements satisfying the...

  • Page 97
    ... at a rate of 12% per year, compounded semiannually, of the initial purchase price per such share. The accreted value accrues daily from the Closing and is taken into account upon certain distributions to the holders of Class B Preferred Shares or upon conversion of the Class B Preferred Shares. In...

  • Page 98
    ... shares it owns on a fully diluted basis. The Company currently designates three directors to the GF Board. Pursuant to the Shareholders' Agreement, if a change of control of AMD occurs within two years of Closing, ATIC will have the right to put any or all GF securities (valued at their fair market...

  • Page 99
    ... total cost of sales. The price for GPU products will be determined by the parties when GF is able to begin manufacturing GPU products for the Company. The Wafer Supply Agreement is in effect through May 2, 2024, however, the Wafer Supply Agreement may be terminated if a business plan deadlock...

  • Page 100
    ... reflects the changes in noncontrolling interest during the years 2009, 2008 and 2007. (in millions) Balance at December 31, 2006 ...Debt accretion ...Foreign exchange translation ...Balance at December 29, 2007 ...Debt accretion ...Purchase of Fab 36 Beteiligungs GmbH limited partner contributions...

  • Page 101
    ...Supplemental Balance Sheet Information Accounts Receivable December 26, 2009 December 27, 2008 Accounts receivable ...Allowance for doubtful accounts ...Total accounts receivable, net ...Inventory $752 (7) $745 $328 (8) $320 December 26, 2009 December 27, 2008 Raw materials ...Work in process...

  • Page 102
    ... of the new accounting standard related to business combinations at the beginning of fiscal year 2009. Future changes will be recorded in the statement of operations. The Company's Chief Operating Decision Maker does not consider certain expenses, including goodwill impairment, in evaluating...

  • Page 103
    ... the AMD Imageon media processor brand and the right to continue selling the products that were part of the Handheld business unit, and the Company intends to support the existing Handheld products and customers through the current product lifecycles. The Company does not intend to develop any new...

  • Page 104
    ... developed at the time of the completion of the ATI acquisition The updated financial forecast for the Graphics segment was lower primarily because of intense pricing competition with its primary competitor throughout 2007 which required an increase in the Company's sales and marketing activities...

  • Page 105
    ... of tax" in its 2007 consolidated statement of operations. The balances of acquisition-related intangible assets as of December 26, 2009, were as follows: Game Developed console Trademark product royalty Customer and trade Customer technology agreements relationships name backlog Total Cost of ATI...

  • Page 106
    ... to acquisition-related intangible assets is as follows: (In millions) Fiscal year 2010 ...2011 ...2012 ...2013 ...Total ...NOTE 7: Financial Instruments $61 29 4 4 $98 Available-for-sale securities held by the Company as of December 26, 2009 and December 27, 2008 were as follows: Amortized Cost...

  • Page 107
    ..., 2009 and December 27, 2008, the Company had approximately $45 million and $31 million, respectively, of available-for-sale investment in money market funds, commercial paper and treasury notes used as collateral for long-term workers' compensation, leasehold, foreign exchange and letter of credit...

  • Page 108
    ... credit markets have affected all of the Company's ARS investments and auctions for these securities have failed to settle on their respective settlement dates. As a result, reliable Level 1 or Level 2 pricing is not available for these ARS. In light of these developments, the Company performs its...

  • Page 109
    ... using significant unobservable inputs (Level 3) is as follows: Year Ended Year Ended December 26, 2009 December 27, 2008 Auction UBS Auction UBS Rate Securities Put Option Rate Securities Put Option (In millions) Beginning balance ...Transfers of ARS into Level 3 ...Redemption at par ...Change...

  • Page 110
    ... or components such as memory, PCBs, substrates and capacitors used in the manufacture of the Company's graphics products are currently available from only a limited number of sources and are often subject to rapid changes in price and availability. Interruption of supply or increased demand in the...

  • Page 111
    ... ...Accrued expenses not currently deductible ...Acquired intangibles ...Tax deductible goodwill ...Investments ...Federal and state tax credit carryovers ...Foreign capitalized research and development costs ...Foreign research and development ITC credits ...Discount of convertible notes ...Other...

  • Page 112
    ... of convertible notes. In 2008 the net valuation allowance increased by $1.1 billion primarily to provide valuation allowance for deferred tax assets related to tax deductible goodwill, intangibles and discount of convertible notes. As of December 26, 2009 and December 27, 2008, the Company had...

  • Page 113
    ... to the Internal Revenue Service, but may result in the utilization of deferred tax assets that are currently subject to a valuation allowance. The Company's operations in Singapore, China and Malaysia currently operate under tax holidays, which will expire in whole or in part at various dates...

  • Page 114
    ... on open audits is highly uncertain. As of December 26, 2009, the Canada Revenue Agency, or CRA, has completed its audit of ATI for the years 2000 through 2004 but had not yet issued its final Notice of Assessment. The U.S. Internal Revenue Service is auditing AMD's tax years 2004 through 2006. As...

  • Page 115
    ... reported sale price of the Company's common stock on August 8, 2007 (the trading date preceding the date of pricing of the 5.75% Notes) of $13.42 per share. This initial conversion rate will be adjusted for certain anti-dilution events. In addition, the conversion rate will be increased in the case...

  • Page 116
    ... last reported sale price of the Company's common stock on April 23, 2007 (the trading date preceding the date of pricing of the 6.00% Notes) of $14.04 per share. The conversion rate will be adjusted for certain anti-dilution events. In addition, the conversion rate will be increased in the case of...

  • Page 117
    ... to pay dividends or make other distributions to the Company; using the proceeds from sales of assets; entering into certain types of transactions with affiliates; and consolidating, merging or selling our assets as an entirety or substantially as an entirety. The agreements governing our 5.75...

  • Page 118
    ...date at the conversion ratio in effect on the date of conversion. The Class B Notes will automatically convert into GF Class B Preferred Shares upon the earlier of (i) a GF IPO, (ii) certain change of control transactions of GF or (iii) the close of business on the business day immediately preceding...

  • Page 119
    ... distributor receivables of its Canadian subsidiary, ATI Technologies. AMD China Revolving Credit Line In November 2009, AMD Products (China) Co. Ltd. (AMD Products) entered into a one year revolving credit agreement in the amount of RMB200 million ($30 million based on a foreign exchange rate as...

  • Page 120
    NOTE 11: Accounting Change-Convertible Debt Instruments In the first quarter of 2009, the Company adopted the new guidance for accounting for convertible debt that may be fully or partially settled in cash upon conversion, as codified principally in ASC 470 and modified its accounting for its 6.00...

  • Page 121
    ...of the new guidance on the affected financial statement line items for the periods indicated: Consolidated Statements of Operations (In millions except per share data) Years Ended December 27, 2008 December 29, 2007 As Retrospectively Effect of As Retrospectively Adjusted As Reported Change Adjusted...

  • Page 122
    ..., the Company has recognized the entire settlement amount in its fiscal 2009 operating results. NOTE 13: Supplemental Statement of Operations Information Gain on sale of 200 millimeter equipment and the license of related process technology During 2008, in conjunction with the conversion of Fab 30...

  • Page 123
    ... began reviewing and addressing operating performance using the following three reportable segments the Computing Solutions segment, which included microprocessors, chipsets and embedded processors and related revenue; the Graphics segment, which included graphics, video and multimedia products and...

  • Page 124
    ..., chipsets and embedded processors and related revenue; the Graphics segment, which includes graphics, video and multimedia products and related revenue as well as revenue received in connection with the development and sale of game console systems that incorporate its graphics technology...

  • Page 125
    The following table provides a summary of net revenue and operating income (loss) by segment and income (loss) from continuing operations before income taxes for the year ended December 26, 2009. Information specific to the Foundry segment and Intersegment Eliminations for prior periods has not been...

  • Page 126
    ... third-party distributors, OEMs, ODMs, add-in-board manufacturers, system integrators, retail stores and e-commerce retailers. In 2009, the Company had one customer that accounted for more than 10 percent of the Company's consolidated net revenues. Net sales to this customer for each period was...

  • Page 127
    ... price greater than $6.34 per share, a grant date on or before June 28, 2008 and an expiration date after July 27, 2010, held by eligible employees for replacement options to be granted under the 2004 Plan (the Option Exchange). The Option Exchange expired on July 27, 2009. As a result, employees...

  • Page 128
    ...purchases under the Company's employee stock purchase plan was allocated in the consolidated statements of operations as follows: Year Ended December 26, 2009 Year Ended December 27, 2008 (In millions) Year Ended December 29, 2007 Cost of sales ...Research and development ...Marketing, general, and...

  • Page 129
    ...made by the Company. The following table summarizes stock option activity and related information: Year Ended December 26, 2009 WeightedAverage Number Exercise of Shares Price Year Ended Year Ended December 27, 2008 December 29, 2007 WeightedWeightedAverage Average Number Exercise Number Exercise of...

  • Page 130
    The summary of the changes in restricted stock awards outstanding during the year ended December 27, 2008, December 29, 2007 and December 31, 2006 is presented below: Year Ended December 26, 2009 WeightedAverage Number Grant Date of Shares Fair Value Year Ended Year Ended December 27, 2008 December ...

  • Page 131
    ... for 2009, 2008 and 2007. Retirement Savings Plan. The Company had a retirement savings plan, commonly known as a 401(k) plan that allowed participating employees in the United States to contribute up to 100 percent of their pre-tax salary subject to Internal Revenue Service limits. The Company...

  • Page 132
    ... gas for its wafer fabrication facilities in Dresden, Germany, and $828 million representing payments by GF to IBM for the period from September 26, 2009 through 2015 pursuant to its joint development agreement. As IBM's services are performed ratably over the life of the agreement, the payments are...

  • Page 133
    ... use and service for one year, provided that, subject to certain exceptions, the Company generally offers a three-year limited warranty to end users for microprocessor products that are commonly referred to as "processors in a box" and for ATI Technologies ULC (ATI)-branded PC workstation products...

  • Page 134
    ... at sales offices worldwide. With respect to its Sunnyvale, California site, the Company entered into a sublease agreement for a portion of these facilities with Spansion Inc. On March 1, 2009, Spansion Inc. filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code...

  • Page 135
    ... with its core strategy of computing and graphics market opportunities and decided to divest this business unit. The Company performed an interim impairment test of goodwill and acquired intangible assets during 2008 and concluded that the carrying amounts of goodwill and certain acquisition-related...

  • Page 136
    ...categories. The results from discontinued operations for the Company's former Digital Television business unit were as follows: 2009 2008 2007 (In millions) Net revenue ...Expenses ...Impairment of goodwill and acquired intangible assets ...Restructuring charges ...Loss from discontinued operations...

  • Page 137
    ... with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Advanced Micro Devices, Inc.'s internal control over financial reporting as of December 26, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee...

  • Page 138
    ... Commission to evaluate the effectiveness of the Company's internal control over financial reporting. Management has concluded that the Company's internal control over financial reporting was effective as of December 26, 2009. Our independent registered public accounting firm, Ernst & Young LLP, has...

  • Page 139
    ... Registered Public Accounting Firm The Board of Directors and Stockholders of Advanced Micro Devices, Inc. We have audited Advanced Micro Devices, Inc.'s internal control over financial reporting as of December 26, 2009, based on criteria established in Internal Control-Integrated Framework...

  • Page 140
    ... share amounts) Mar. 29 Net revenue ...Cost of sales ...Gross margin ...Research and development ...Marketing, general and administrative ...Legal settlement(1) ...Amortization of acquired intangible assets ...Impairment of goodwill and acquired intangible assets(2) ...Restructuring ...Gain on sale...

  • Page 141
    ... agreement, Intel paid us $1.25 billion in December 2009 and we recorded a $1.242 billion gain net of certain expenses. Represents impairments taken on ATI goodwill and acquired intangible assets. Represents a gain on the sale of 200 millimeter equipment associated with the conversion of Fab...

  • Page 142
    ... pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). This type of evaluation is performed on a quarterly basis so that conclusions of management, including our Chief Executive Officer and Chief Financial Officer, concerning the effectiveness of the disclosure controls can be reported in our...

  • Page 143
    ... Statement shall not be deemed to be filed as part of this report. Without limiting the foregoing, the information under the captions, "Compensation Committee Report" and "Audit Committee Report" in our 2010 Proxy Statement is not incorporated by reference in this Annual Report on Form 10-K. 135

  • Page 144
    ... ULC and ATI Technologies Inc. dated as of July 23, 2006 filed as Exhibit 2.2 to AMD's Current Report on Form 8-K dated July 23, 2006, is hereby incorporated by reference. Asset Purchase Agreement by and among Broadcom Corporation, Broadcom International Limited, and Advanced Micro Devices, Inc...

  • Page 145
    ... incorporated by reference. Advanced Micro Devices, Inc. 2005 Annual Incentive Plan, filed as Exhibit 10.2 to AMD's Current Report on Form 8-K dated October 12, 2005, is hereby incorporated by reference. Form of Bonus Deferral Agreement, filed as Exhibit 10.12 to AMD's Annual Report on Form 10-K for...

  • Page 146
    ... Award (2004 Equity Incentive Plan) filed as Exhibit 10.4 to AMD's Quarterly Report on Form 10-Q for the period ended October 1, 2006, is hereby incorporated by reference Advanced Micro Devices, Inc. Deferred Income Account Plan, amended and restated, effective as of January 1, 2008 filed as Exhibit...

  • Page 147
    ... and Restatement of "S" Process Development Agreement between International Business Machines Corp. and Advanced Micro Devices, Inc. effective as of December 28, 2002 filed as Exhibit 10.36 to AMD's Annual Report on Form 10-K for the year ended December 31, 2006 is hereby incorporated by reference...

  • Page 148
    ... Agent) and AMD Netherlands Technologies B.V. filed as Exhibit 10.2 to AMD's Current Report on Form 8-K dated March 5, 2009, is hereby incorporated by reference. Limited Partnership Agreement of AMD Fab 36 Limited Liability Company & Co. KG dated April 21, 2004, by and between AMD Fab 36 LLC, LM...

  • Page 149
    ... the period ended September 27, 2008, is hereby incorporated by reference. Shareholders' Agreement dated March 2, 2009 by and among Advanced Micro Devices, Inc., Advanced Technology Investment Company LLC, and The Foundry Company filed as Exhibit 10.3 to AMD's Current Report on Form 8-K dated March...

  • Page 150
    ... among Advanced Micro Devices, Inc., Advanced Technology Investment Company LLC, and The Foundry Company filed as Exhibit 10.4 to AMD's Current Report on Form 8-K dated March 5, 2009, is hereby incorporated by reference. Wafer Supply Agreement dated March 2, 2009 by and among Advanced Micro Devices...

  • Page 151
    ... of this Exhibit have been omitted pursuant to a request for confidential treatment. These portions have been filed separately with the Securities and Exchange Commission. AMD will furnish a copy of any exhibit on request and payment of AMD's reasonable expenses of furnishing such exhibit. 143

  • Page 152
    ... undersigned, thereunto duly authorized. February 19, 2010 ADVANCED MICRO DEVICES, INC. By: /s/ THOMAS J. SEIFERT Thomas J. Seifert Senior Vice President, Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 153
    SCHEDULE II ADVANCED MICRO DEVICES, INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 29, 2007, December 27, 2008 and December 26, 2009 (In millions) Additions Charged (Reductions Credited) To Operations Balance Beginning of Period Deductions(1) Balance End of Period Allowance for ...

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    Cert no. SCS-COC-000648 AMD-31211G