AMD 2009 Annual Report Download - page 66

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televisions that did not contain our technology. The availability and adoption of these low cost alternatives by
consumers resulted in lower 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. These two principal factors resulted in lower near-term and longer-term forecasts of revenues,
operating profitability, and cash flows compared to our forecast at the time of the ATI acquisition.
These updated long-term financial forecasts represented the best estimate that we had at the time, and we
believe that the underlying assumptions were reasonable at that time.
The outcome of our 2007 goodwill impairment analysis indicated that the carrying amount of certain
acquisition-related intangible assets or asset groups may not be recoverable. We assessed the recoverability of the
acquisition-related intangible assets or asset groups, as appropriate, by determining whether the unamortized
balances could be recovered through undiscounted future net cash flows. We determined that certain of the
acquisition related developed product technology associated with our Graphics and Consumer Electronics
segments was impaired primarily due to the revised lower revenue forecasts associated with the products
incorporating such developed product technology. We measured the amount of impairment by calculating the
amount by which the carrying value of the assets exceeded their estimated fair values, which were based on
projected discounted future net cash flows. As a result of this impairment analysis, we recorded an impairment
charge of $349 million, of which $219 million is included in the caption “Impairment of goodwill and acquired
intangible assets” and $130 million is included in the caption “Income (loss) from discontinued operations, net of
tax” in our 2007 consolidated statement of operations.
Gain on sale of 200 millimeter equipment and the license of related process technology
During 2008, in conjunction with the conversion of Fab 30, our former manufacturing facility in Dresden,
Germany, from 200 millimeter to 300 millimeter fabrication, we sold certain 200 millimeter manufacturing
equipment and licensed certain process technology to a third party. We evaluated this multiple-element
arrangement and determined that each component was considered a separate unit of accounting. In addition, the
transaction consideration was allocated to each unit based on their relative fair values.
Upon delivery of a majority of the manufacturing equipment to the applicable third party, we recognized a
gain of approximately $167 million, which is classified in the caption “Gain on sale of 200 millimeter
equipment” in our 2008 consolidated statement of operations. The difference between the $167 million gain
recognized in the transaction described above and the $193 million gain shown in the consolidated statement of
operations for 2008 represents gains recognized on sales of 200 millimeter equipment to other third parties. In
addition, we deferred recognizing approximately $49 million of payments received pending the future delivery of
the remaining manufacturing equipment. Upon delivery of the process technology, we recognized revenue of
approximately $191 million, which is included under the caption “Net revenue” in our 2008 consolidated
statement of operations. During 2009, there was no activity related to the sale of 200 millimeter equipment, and
the deferred gain of $47 million is classified under the caption “Other long-term liabilities” in our consolidated
balance sheets.
Effects of Restructuring Plans
In the second and fourth quarters of 2008, we initiated restructuring plans (the 2008 Restructuring Plans) to
reduce our cost structure. Both plans primarily involved the termination of employees.
The restructuring charges recorded in conjunction with the plan initiated during the second quarter of 2008
primarily represented severance and costs related to the continuation of certain employee benefits and costs to
terminate a contract. This plan was completed during the third quarter of 2009.
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