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2011 ANNUAL REPORT ON FORM 10-K

Table of contents

  • Page 1
    2011 ANNUAL REPORT ON FORM 10-K

  • Page 2
    ... to meet customer demand and accounted for more than one third of our total server unit shipments in the fourth quarter. Continued adoption in the high performance computing market was bolstered by the introduction of several HP and Dell servers powered by the AMD Opteron 6200 processor. In the...

  • Page 3
    ... reported closing sale price of $7.11 per share as reported on the New York Stock Exchange on July 1, 2011, which was the last business day of the registrant's most recently completed second fiscal quarter. Indicate the number of shares outstanding of each of the registrant's classes of common stock...

  • Page 4

  • Page 5
    ... OFFICERS AND CORPORATE GOVERNANCE ...EXECUTIVE COMPENSATION ...SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ...CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE ...PRINCIPAL ACCOUNTING FEES AND SERVICES ... PART IV ...ITEM...

  • Page 6

  • Page 7
    ...the expected rate of market growth and demand for our products and technologies (and the mix thereof); manufacturing yields and wafer volumes from our thirdparty wafer foundry suppliers; our expected market share; our expected product costs and average selling price; our overall competitive position...

  • Page 8
    ..., embedded microprocessors for commercial, commercial client and consumer markets and chipsets for desktop and mobile devices, including mobile personal computers, or PCs, and tablets, professional workstations and servers; and (ii) graphics, video and multimedia products for desktop and mobile...

  • Page 9
    ... number of CPUs, or cores, on a microprocessor, the bit rating of the microprocessor, memory size and data access speed. Developments in circuit design and manufacturing process technologies have resulted in significant advances in microprocessor performance. Currently, microprocessors are designed...

  • Page 10
    ... photo and video editing or other multi-media applications can benefit from our accelerated computing architecture. Microprocessor Products (CPUs and APUs) We currently design, develop and sell microprocessor products for servers, desktop PCs and mobile devices, including mobile PCs and tablets. Our...

  • Page 11
    ...in January 2011 and the Z-Series APU for Windows-based tablets, codenamed "Desna," that we launched in June 2011. Our APUs for mobile platforms combine discrete-level graphics, dedicated HD video processing and multi-core CPU processors on a single die for maximum performance and power efficiency in...

  • Page 12
    ...- and dual- core versions, and AMD Sempron processors. We designed the AMD FX processors for multitasking, high resolution gaming, and HD media processing. Embedded Processor Products Our embedded products address customer needs in PC-adjacent markets. Typically, our embedded products are used in...

  • Page 13
    ... 9-Series Chipsets designed to help our customers develop next generation high performance desktop platforms. Graphics Graphics Market The primary product of a semiconductor graphics supplier is the GPU. The GPU is specifically architected for high performance graphics processing, unlike the CPU. In...

  • Page 14
    ... for HD game play, video playback and productivity applications. Discrete Mobile Graphics. When selecting a graphics solution, key considerations for mobile PC manufacturers are graphics performance, visual experience, power efficiency, dedicated memory support and ease of design integration. Our...

  • Page 15
    ...APU, AMD Phenom, AMD Turion, AMD Athlon and AMD Sempron. AMD Athlon processors and AMD Turion processors are sometimes marketed using the "Neo" model designator for low power products targeted at the thin-and-light mobile segment. Our server brand for microprocessors is AMD Opteron. We also sell low...

  • Page 16
    ... as desktop and server motherboard manufacturers who incorporate chipsets into their channel motherboards. Our sales and marketing teams work closely with our customers to define product features, performance and timing of new products so that the products we are developing meet our customers' needs...

  • Page 17
    ... reliability, speed, performance, size (or form factor), cost, selling price, adherence to industry standards (and the creation of open industry standards), software and hardware compatibility and stability, brand recognition, timely product introductions and availability. Technological advances in...

  • Page 18
    ...custom CPU cores based on ARM architecture to support future products ranging from PCs and servers to workstations and super computers. Competition in the Chipset Market In the chipset market, our competitors include suppliers of integrated graphics chipsets. PC manufacturers use integrated chipsets...

  • Page 19
    ... software developers to easily program APUs by combining scalar processing on the CPU with parallel processing on the GPU, all while providing high bandwidth access to memory at low power. We believe that these integrated platforms will bring customers better time-to-market and increased performance...

  • Page 20
    ... because using more advanced process technology can contribute to lower product manufacturing costs and improve a product's performance and power efficiency. Other Third-Party Manufacturers. party manufacturers. We outsource board-level graphics product manufacturing to third- Assembly, Test, Mark...

  • Page 21
    ... cross-licensing and technology exchange agreements with other companies under which we both transfer and receive technology and intellectual property rights. One such agreement is the cross-license agreement that we entered into with Intel on November 11, 2009, in connection with the settlement of...

  • Page 22
    ... back-end manufacturing processes and the design and marketing of our products are in development throughout the world. In addition, a number of jurisdictions including the EU, Australia and China are developing or finalizing market entry requirements or public procurement for computers and servers...

  • Page 23
    ... and pricing actions, designed to limit our market share and margins; product mix and introduction schedules; product bundling, marketing and merchandising strategies; exclusivity payments to its current and potential customers and channel partners; control over industry standards, PC manufacturers...

  • Page 24
    ... APU products, computer manufacturers have increasingly selected APUs for their AMD product-based solutions, particularly for mobile PCs, because the APU platforms cost less than the combined cost of a legacy microprocessor, discrete graphics card and chipset, while offering comparable performance...

  • Page 25
    ...is unable to remain competitive using advanced process technologies or is unable to manufacture our products on a timely basis, at competitive prices, or meet our capacity requirements, our business could be materially adversely affected. For example, during the third quarter of 2011, GF experienced...

  • Page 26
    ... graphics businesses. We depend on third-party companies for the design, manufacture and supply of motherboards, BIOS software and other components that our customers utilize to support our microprocessor and GPU offerings. We also rely on our add-in-board partners (AIBs) to support our GPU business...

  • Page 27
    ... x86 instruction sets or does not continue to develop and maintain their operating systems to support our graphics products, independent software providers may forego designing their software applications to take advantage of our innovations and customers may not purchase PCs with our products. In...

  • Page 28
    ... better performance or include additional features that render our products uncompetitive and aggressive pricing by competitors, especially during challenging economic times. For example, ARM-based processors are used in mobile and embedded electronics products as relatively low cost and small...

  • Page 29
    ... subsidiaries to pay dividends or make other distributions to us; use the proceeds from sales of assets; enter into certain types of transactions with affiliates; and consolidate or merge or sell our assets as an entirety or substantially as an entirety. The agreements governing our borrowing...

  • Page 30
    ... selling prices; the cyclical nature of supply/demand imbalances in the semiconductor industry; a decline in demand for end-user products (such as PCs) that incorporate our products; and excess inventory levels in the channels of distribution, including those of our customers. Global economic...

  • Page 31
    ...for our microprocessors, including APU products. Similarly, certain non-proprietary materials or components such as memory, printed circuit boards (PCBs), substrates and capacitors used in the manufacture of our graphics products are currently available from only a limited number of sources. Because...

  • Page 32
    ..., our manufacturing suppliers and to our customers. In addition, we rely on third parties to provide certain information technology services to us, including helpdesk support, desktop application services, business and software support applications, server and storage administration, data center...

  • Page 33
    ... the world which our business depends upon. A disruption, infiltration or failure of our information technology systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber attacks, employee theft or misuse, power disruptions, natural disasters or...

  • Page 34
    ... limited levels of product returns. Our agreements with AIBs protect their inventory of our products against price reductions. We defer the gross margins on our sales to distributors and AIBs, resulting from both our deferral of revenue and related product costs, until the applicable products...

  • Page 35
    ...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 our products in the local currency of such customers. An appreciation of the U.S. dollar relative to the...

  • Page 36
    ...result in our having to stop the sale of some of our products or to increase the costs of selling some of our products or which 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...

  • Page 37
    ... matters will be damaging to our business, results of operations or reputation. Failures in the global credit markets have impacted and may continue to impact the liquidity of our auction rate securities. As of December 31, 2011, the par value of all our auction rate securities, or ARS, was $45...

  • Page 38
    ... back-end manufacturing processes and the design and marketing of our products are in development throughout the world. In addition, a number of jurisdictions including the EU, Australia and China are developing or finalizing market entry requirements or public procurement for computers and servers...

  • Page 39
    ... assembly and test facilities. As of December 31, 2011, we also leased approximately 2.6 million square feet of space for engineering, manufacturing, warehouse and administrative use, including a number of smaller regional sales offices located in commercial centers near customers, principally in...

  • Page 40
    ... various actions that arose in the normal course of business. In the opinion of management, the aggregate liability, if any, with respect to these matters will not have a material adverse effect on our financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 34

  • Page 41
    ...York Stock Exchange. On February 17, 2012, there were 7,264 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 our common stock for the periods indicated: High Low Year ended December...

  • Page 42
    ... December 31, 2011. The past performance of our common stock is no indication of future performance. Comparison of Cumulative Five Year Total Return $150 $100 $50 $0 2006 2007 2008 2009 2010 2011 Advanced Micro Devices, Inc. S&P 500 Index S&P 500 Semiconductors Index Company / Index Base...

  • Page 43
    ITEM 6. SELECTED FINANCIAL DATA Five Years Ended December 31, 2011 (In millions except per share amounts) 2011(1) 2010(1) 2009(1) 2008(1) 2007(1) Net revenue ...$6,568 $6,494 $5,403 $ 5,808 $ 5,858 Income (loss) from continuing operations(2)(3)(4)(5) ...495 471 296 (2,412) (2,808) Loss from ...

  • Page 44
    ... due to the impairment of ATI acquisition-related goodwill and acquired intangible assets, lower cash, cash equivalents and marketable securities used to fund our operations, and the sale and impairment of assets associated with the divestiture of the Digital Television business unit in 2008. 38

  • Page 45
    ..., video and multimedia products for desktop and mobile devices, including mobile PCs and tablets, home media PCs and professional workstations, servers and technology for game consoles. In MD&A, we will describe the general financial condition and the results of operations for Advanced Micro Devices...

  • Page 46
    ... 2011, we changed our method of accounting for our ownership interest in GF from the equity method to the cost method of accounting. As a result, we no longer recognize any share of GF's net income or loss in our consolidated statements of operations. GLOBALFOUNDRIES Formation and Accounting in 2009...

  • Page 47
    ... November 2009, upon the settlement of our litigation with Intel Corporation and the execution of a patent cross license agreement between us and Intel, the requirements satisfying the Reconciliation Event were met. As a result, GF's Class A and Class B Preferred Shares vote on an as converted basis...

  • Page 48
    ... Shares at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date at the conversion ratio in effect on the date of conversion. The Class B Notes mature ten years from the date of issuance. However, they automatically convert...

  • Page 49
    ...business that manufactures MPU products, we will have up to two years to transition the manufacture of such MPU products to GF. In addition, once GF establishes certain specific qualified processes for bulk silicon wafers, we will purchase from GF, where competitive, specified percentages of our GPU...

  • Page 50
    ... GLOBALFOUNDRIES Singapore Pte. Ltd. (GFS, formerly Chartered) Contribution in Fiscal 2011 On December 27, 2010, pursuant to the Contribution Agreement, ATIC International Investment Company LLC, an affiliate of ATIC, contributed all of the outstanding Ordinary Shares of GFS to GF in exchange...

  • Page 51
    ...In addition, during the first quarter of 2011, we incurred a charge of $24 million related to a payment to GF, primarily for certain manufacturing assets of GF, which do not benefit us. Funding of GF During 2011, ATIC contributed $4.4 billion of cash to GF in exchange for GF securities consisting of...

  • Page 52
    ... the remaining specific inventory 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...

  • Page 53
    ... less costs to sell. For assets to be disposed of other than by sale, impairment losses are measured as their carrying amount less salvage value, if any, at the time the assets cease to be used. Income Taxes. In determining taxable income for financial statement reporting purposes, we must make...

  • Page 54
    ... quarter of 2009, as a result of the formation of GF, we began reviewing and assessing operating performance using the following reportable segments: • • the Computing Solutions segment, which included microprocessors, chipsets and embedded processors and related revenue; the Graphics segment...

  • Page 55
    ... APU products for mobile devices increased due to strong demand for our Brazos and Llano-based APU platforms. However, the increase in unit shipments in 2011 was limited by supply constraints with respect to certain microprocessor products manufactured using the 32nm technology node. Chipset...

  • Page 56
    ... in manufacturing costs and a one-time benefit related to the deconsolidation of GF in 2010. Research and development expenses and marketing, general and administrative expenses increased for the reasons set forth under "Expenses," below. Graphics Graphics net revenue of $1.6 billion in 2011...

  • Page 57
    ... consolidated statement of operations data for 2011, 2010 and 2009. 2011 2010 2009 (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...

  • Page 58
    ... supply of microprocessor products manufactured using the 32nm technology node and a decline in average selling price of our microprocessor products for servers. Gross margin as a percentage of net revenue was 46% in 2010 compared to 42% in 2009. Gross margin in 2010 included the $69 million benefit...

  • Page 59
    ... and design costs for our future products, a $68 million increase in employee compensation and benefit expense and a $64 million increase in manufacturing process technology expenses related to GF for our future products. The increase in research and development expenses attributable to our Graphics...

  • Page 60
    ... were required to perform to earn this settlement payment. That is, the patent cross license agreement represented fully paid up licenses by both AMD and Intel for which no future payments or delivery was required. Accordingly, we recognized the entire settlement amount in our 2009 operating results...

  • Page 61
    .... The following table provides a summary of each major type of cost associated with the 2011 and 2008 restructuring plans for the periods presented: 2011 2010 2009 (In millions) Severance and benefits ...Contract or program terminations ...Asset impairments ...Facility consolidations and closures...

  • Page 62
    ...liability related to certain 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. These gains were partially offset by a $27 million foreign exchange loss, a $17 million...

  • Page 63
    ...the years ended December 31, 2011, December 25, 2010 and December 26, 2009 was allocated in our consolidated statements of operations as follows: 2011 2010 2009 (In millions) Cost of sales ...Research and development ...Marketing, general and administrative ...Total stock-based compensation expense...

  • Page 64
    ... adding an amount of $396 million, which represents payments made by certain of our distributor customers during 2011 to IBM Credit LLC and certain of its subsidiaries (collectively, the IBM Parties) pursuant to our former accounts receivable financing arrangement among AMD, certain AMD subsidiaries...

  • Page 65
    ...in the credit markets as mentioned above, all of our auction rate securities (ARS) were negatively affected and auctions for these securities failed to settle on their respective settlement dates since February 2008. However, there have been no defaults, and we have received all interest payments as...

  • Page 66
    ... of the final settlement payment from Samsung of $117 million. Net cash used in operating activities was $412 million in 2010. Net income of $471 million was adjusted for non-cash charges consisting primarily of a $462 million loss from the application of the equity method of accounting for our...

  • Page 67
    ... the Canadian government for research and development activities related to our AMD Fusion products and from the Malaysian and Chinese governments for our local microprocessor assembly, test and packaging facilities, and $18 million from the exercise of employee stock options. During 2011, we did...

  • Page 68
    ..., as of December 31, 2011, and is supplemented by the discussion following the table: Payment due by period (In millions) Total 2012 2013 2014 2015 2016 2017 and beyond 5.75% Convertible Senior Notes due 2012 ...6.00% Convertible Senior Notes due 2015(1) ...8.125% Senior Notes due 2017(1) ...7.75...

  • Page 69
    ... directly or through intermediaries, or by tender offer, when we believe the market conditions are favorable to do so. See Note 10 of "Notes to Consolidated Financial Statements" below, for additional information regarding the 8.125% Notes. 7.75% Senior Notes Due 2020 On August 4, 2010, we issued...

  • Page 70
    ... offer, when we believe the market conditions are favorable to do so. See Note 10 of "Notes to Consolidated Financial Statements," below, for additional information regarding the 7.75% Notes. The agreements governing its 5.75% Notes, 6.00% Notes, 8.125% Notes and 7.75% Notes contain crossdefault...

  • Page 71
    ...On March 31, 2011, GF fully repaid the amounts outstanding under the Fab 36 Term Loan. We were not required to make any payments under the related guarantee agreement. AMTC and BAC Guarantees The Advanced Mask Technology Center GmbH & Co. KG (AMTC) and Maskhouse Building Administration GmbH & Co. KG...

  • Page 72
    ... funds by limiting default risk and market risk. We actively monitor market conditions and developments specific to the securities and security classes in which we invest. We believe that we take a conservative approach to investing our funds in that we invest only in highly-rated debt securities...

  • Page 73
    ... also incurred cost and carried assets and liabilities that were denominated primarily in the Euro. We maintain a foreign currency hedging strategy, which uses derivative financial instruments to mitigate the risks associated with changes in foreign currency exchange rates. This strategy takes into...

  • Page 74
    ...months. December 31, 2011 December 25, 2010 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: Canadian Dollar ...Euro ...Total ... $141...

  • Page 75
    ...DATA Advanced Micro Devices, Inc. Consolidated Statements of Operations Year Ended December 31, December 25, December 26, 2011 2010 2009 (In millions, except per share amounts) Net revenue ...Cost of sales ...Gross margin ...Research and development ...Marketing, general and administrative ...Legal...

  • Page 76
    ...Treasury stock, at cost (9 shares on December 31, 2011 and 8 shares on December 25, 2010) ...Accumulated deficit ...Accumulated other comprehensive income (loss) ...Total stockholders' equity ...Total liabilities and stockholders' equity ...See accompanying notes to consolidated financial statements...

  • Page 77
    Advanced Micro Devices, Inc. Consolidated Statements of Stockholders' Equity Three Years Ended December 31, 2011 (In millions) Accumulated Number Additional other Total of paid-in Treasury Accumulated comprehensive stockholders' shares Amount capital stock deficit income (loss) equity December 27, ...

  • Page 78
    Advanced Micro Devices, Inc. Consolidated Statements of Cash Flows Year Ended December 31, 2011 December 25, 2010 (In millions) December 26, 2009 Cash flows from operating activities: Net income ...Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: ...

  • Page 79
    ...embedded microprocessors for commercial, commercial client and consumer markets and chipsets for desktop and mobile devices, including mobile PCs and tablets, professional workstations and servers; and (ii) graphics, video and multimedia products for desktop and mobile devices, including mobile PCs...

  • Page 80
    ... and marketing promotions and volume based incentives and special pricing arrangements, at the time the related revenues are recognized. For transactions where the Company reimburses a customer for a portion of the customer's cost to perform specific product advertising or marketing and promotional...

  • Page 81
    ... to sell these securities within 12 months Derivative Financial Instruments. The Company maintains a foreign currency hedging strategy, which uses derivative financial instruments to mitigate the risks associated with changes in foreign currency exchange rates. This strategy takes into consideration...

  • Page 82
    ... customers of "tray" microprocessor products and/or workstation graphics products who have written agreements with the Company and target their computer systems at the commercial and/or embedded markets. The Company accrues warranty costs at the time of sale of warranted products. Foreign Currency...

  • Page 83
    ... customer incentive programs are accrued and the costs are recorded upon agreement with customers and vendor partners. Cooperative advertising expenses are recorded as marketing, general and administrative expense to the extent the cash paid does not exceed the fair value of the advertising benefit...

  • Page 84
    ... a straight-line basis over the requisite service period. The application of the lattice-binomial option-pricing model requires the use of extensive actual employee exercise behavior data and the use of a number of complex assumptions including expected volatility of the Company's common stock, risk...

  • Page 85
    ... consolidated financial statements. NOTE 3: GLOBALFOUNDRIES Formation and Accounting in 2009 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...

  • Page 86
    ... 2009, upon the settlement of the Intel litigation (discussed in Note 11) and the execution of a patent cross license agreement between the Company and Intel, the requirements satisfying the Reconciliation Event were met. As a result, GF's Class A and Class B Preferred Shares vote on an as converted...

  • Page 87
    ... to the Company, based on its proportional ownership interest of GF's Class A Preferred Shares (83% in 2009). At the Closing, AMD, ATIC and GF also entered into a Shareholders' Agreement (the Shareholders' Agreement), a Funding Agreement (the Funding Agreement), and a Wafer Supply Agreement (the WSA...

  • Page 88
    ...participate in the funding. As of December 26, 2009, the Company's ownership interest in GF (on a fully converted to Ordinary Shares basis) was approximately 32%. Wafer Supply Agreement. The WSA governs the terms by which the Company purchases products manufactured by GF. Pursuant to the WSA, during...

  • Page 89
    ... effective as of December 27, 2009, the Company deconsolidated GF and during fiscal 2010 it accounted for its ownership interest in GF under the equity method of accounting. Under the deconsolidation accounting guidelines, the investor's opening investment is recorded at fair value as of the date of...

  • Page 90
    ...Supply Agreements GLOBALFOUNDRIES Singapore Pte. Ltd. (GFS, formerly Chartered) Contribution in Fiscal 2011 On December 27, 2010, pursuant to the Contribution Agreement, ATIC II, contributed all of the outstanding Ordinary Shares of GFS to GF in exchange for 2,808,981 newly issued shares of GF Class...

  • Page 91
    ... the production of certain graphics processing unit (GPU) and chipset products at GF. Pursuant to the amendment, GF has committed to provide the Company with, and the Company has committed to purchase, a fixed number of 45nm and 32nm wafers per quarter in 2011. The Company paid GF a fixed price for...

  • Page 92
    ... quarter of 2011, the Company incurred a charge of $24 million related to a payment to GF, primarily for certain manufacturing assets of GF, which did not benefit the Company. NOTE 4: Noncontrolling Interest Leipziger Messe and Fab 36 Beteiligungs GmbH, the original unaffiliated limited partners...

  • Page 93
    ... expense for 2011, 2010 and 2009 was $217 million, $256 million and $948 million, respectively. Accrued liabilities December 31, December 25, 2011 2010 (In millions) Accrued compensation and benefits ...Marketing programs and advertising expenses ...Software technology and licenses payable ...Other...

  • Page 94
    ... 26, 2009 was $323 million. Annual Impairment Analyses In the fourth quarters of 2011 and 2010, the Company conducted its annual impairment tests of goodwill. Based on the results of the Company's analysis of goodwill, each reporting unit's fair values exceeded its carrying value by a significant...

  • Page 95
    ... for the periods presented. At December 31, 2011 and December 25, 2010, the Company had approximately $10 million and $29 million, respectively, of available-for-sale investments in money market funds used as collateral for leased buildings and letter of credit deposits, which were included in other...

  • Page 96
    ...12 months. During 2011, the Company invested $149 million in long-term marketable securities, which the Company intends to hold greater than one year, and does not intend to use in current operations. The Company realized net gains of $16 million on sales of available-for-sale securities during 2010...

  • Page 97
    ...: Fair value measurement at reporting dates using Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) (In millions) December 31, 2011 Assets Classified as cash equivalents: Money market funds...

  • Page 98
    ... in money market mutual funds, commercial paper, time deposits, marketable equity securities, corporate bonds, and foreign currency derivative contracts are primarily classified within Level 1 or Level 2. This is because such financial instruments are valued primarily using quoted market prices or...

  • Page 99
    ... limits, credit lines, monitoring procedures and credit approvals. Furthermore, the Company performs in-depth credit evaluations of all new customers and, at intervals, for existing customers. From this, the Company may require letters of credit, bank or corporate guarantees or advance payments...

  • Page 100
    ... its internal back-end manufacturing operations. Similarly, certain non-proprietary materials 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. Interruption of supply...

  • Page 101
    ... 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 ...Total...

  • Page 102
    ...valuation allowance utilized ...Alternative minimum tax ...Credit monetization ...2009 Statutory federal income tax expense ...State taxes, net of federal benefit ...Foreign income at other than U.S. rates ...Foreign losses not benefited ...Foreign benefits not realized ...US special deduction under...

  • Page 103
    ...quarter of 2010, the U.S. Internal Revenue Service completed its audit of the U.S. Federal income tax returns for the years ending 2004 through 2006 inclusive. As of December 31, 2011 the German tax authorities completed its audit of AMD's German subsidiaries for the tax years 2001 through 2004. AMD...

  • Page 104
    ... $20.13 per share. This initial conversion price represents a premium of 50% relative to the last 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...

  • Page 105
    ... 31, 2011, the outstanding aggregate principal amount of the 6.00% Notes was $580 million and the remaining carrying value was approximately $546 million, net of debt discount of $34 million. In the first quarter of 2009, the Company adopted the new guidance for accounting for convertible debt that...

  • Page 106
    ... conversion rate of 35.6125 shares of common stock per $1,000 principal amount of 6.00% Notes, which is equivalent to an initial conversion price of $28.08 per share. This initial conversion price represents a premium of 100% relative to the last reported sale price of the Company's common stock...

  • Page 107
    ... restrictions on the ability of its subsidiaries 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...

  • Page 108
    ...due and payable. Fab 36 Term Loan and Guarantee In connection with the consummation of the GF manufacturing joint venture transaction on March 2, 2009, the terms of the 700 million euro Term Loan Facility Agreement among AMD Fab 36 Limited Liability Company & Co. KG, as borrower, and a consortium of...

  • Page 109
    ...a confidential Settlement and License Agreement that resolved this litigation matter for an immaterial amount and that provides immunity under all Graphics Properties Holdings, Inc. (GPHI) patents for alleged infringement by AMD products, including components, software and designs. On April 26, 2011...

  • Page 110
    ..., pursuant to the settlement agreement, Samsung granted to the Company, and the Company granted to Samsung, non-exclusive, royalty-free licenses to all patents and patent applications for ten years after the effective date of the Agreement to make, have made, use, sell, offer to sell, import and...

  • Page 111
    ... quarter of 2009, as a result of the formation of GF, the Company began reviewing and assessing operating performance using the following reportable segments: • • the Computing Solutions segment, which included microprocessors, chipsets and embedded processors and related revenue; the Graphics...

  • Page 112
    ... product and system research and development activities for its products in Canada, India, Great China, Singapore, Taiwan, Germany, United Kingdom, Israel and Japan. The Company's back end manufacturing subsidiaries are located in Malaysia, Singapore and Great China. Its material sales and marketing...

  • Page 113
    ..., December 25, 2011 2010 (In millions) United States ...Malaysia ...Greater China ...Singapore ...Other countries ...Total long-lived assets ... $455 70 60 56 85 $726 $418 70 51 79 82 $700 NOTE 14: Stock-Based Incentive Compensation Plans The Company's stock-based incentive programs are intended...

  • Page 114
    ... an employee of the Company, the grants will vest in three equal annual installments on the applicable vesting date. The Company estimated the fair value of market-based restricted stock units and stock options using a Monte Carlo simulation model on the date of grant. As of December 31, 2011, there...

  • Page 115
    ...statements of operations as follows: 2011 2010 2009 (In millions) Cost of sales ...Research and development ...Marketing, general, and administrative ...Total stock-based compensation expense, net of tax of $0 ... $ 6 46 38 $90 $ 4 46 37 $87 $ 3 40 32 $75 During 2011, 2010, and 2009, the Company...

  • Page 116
    ...1.79 years. NOTE 15: Other Employee Benefit Plans Retirement Savings Plan. The Company has a retirement savings plan, commonly known as a 401(k) plan, that allows participating employees in the United States to contribute up to 100% of their pre-tax salary subject to Internal Revenue Service limits...

  • Page 117
    ... the AMTC rental contract guarantee terminated. The Company was not required to make any payments under the guarantee. In addition, the Company and GF were joint and several guarantors of 50% of AMTC's obligations under a revolving credit facility. In December 2011, the Company was released from the...

  • Page 118
    ...CPU and AMD A-Series APU products that are commonly referred to as "processors in a box" and has also offered extended limited warranties to certain customers of "tray" microprocessor products and/or workstation graphics products who have written agreements with the Company and target their computer...

  • Page 119
    ...31, 2011 ...2008 Restructuring $- 54 (32) - $ 22 $- 46 - (1) $ 45 $- 100 (32) (1) $ 67 In the fourth quarter of 2008, the Company initiated a restructuring plan to reduce its cost structure, which was substantially completed in 2009. This plan primarily involved the termination of employees. The...

  • Page 120
    ... the consolidated statement of operations as follows: 2011 2010 (In millions) Foreign Currency Forward Contracts Contracts designated as cash flow hedging instruments Other comprehensive loss ...Research and development ...Marketing, general and administrative ...Contracts not designated as hedging...

  • Page 121
    ... statements taken as a whole, presents fairly in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Advanced Micro Devices, Inc.'s internal control over financial reporting...

  • Page 122
    ... opinion, Advanced Micro Devices, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States...

  • Page 123
    ...the first quarter of 2011 consisted of 14 weeks. (In millions, except per share amounts) 2011 Dec. 31 Oct. 1 Jul. 2 Apr. 2 Dec. 25 2010 Sep. 25 Jun. 26 Mar. 27 Net revenue ...$1,691 Cost of sales ...918 Gross margin ...773 Research and development ...358 Marketing, general and administrative ...243...

  • Page 124
    ... into settlement agreement with Samsung. Pursuant to the settlement agreement, Samsung agreed to pay the Company $283 million, net of withholding taxes. The Company recorded this amount as a gain in 2010. During the fourth fiscal quarter of 2011, the Company implemented a restructuring plan and...

  • Page 125
    ...of the design and operation of our disclosure controls and procedures 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...

  • Page 126
    ...limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company...

  • Page 127
    ...OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information under the captions "Principal Stockholders," "Security Ownership of Directors and Executive Officers" and "Equity Compensation Plan Information" in our 2012 Proxy Statement is incorporated herein by reference...

  • Page 128
    ...: Exhibit Number Description of Exhibits **2.1 Asset Purchase Agreement by and among Broadcom Corporation, Broadcom International Limited, and Advanced Micro Devices, Inc., dated August 25, 2008 filed as Exhibit 2.1 to AMD's Quarterly Report on Form 10-Q for the period ended September 27, 2008, is...

  • Page 129
    ... Exhibit 10.1 to AMD's Quarterly Report on Form 10-Q for the period ended June 27, 2009, is hereby incorporated by reference. Form of Stock Option Agreement Non-U.S. Stock Option Award Advanced Micro Devices, Inc. 2004 Equity Incentive Plan filed as Exhibit 10.2 to AMD's Quarterly Report on Form 10...

  • Page 130
    Exhibit Number Description of Exhibits *10.14 Form of Restricted Stock Unit Agreement Non-U.S. Restricted Stock Unit Award Advanced Micro Devices, Inc. 2004 Equity Incentive Plan filed as Exhibit 10.3 to AMD's Quarterly Report on Form 10-Q for the period ended June 27, 2009, is hereby ...

  • Page 131
    ...Credit LLC and Advanced Micro Devices, Inc. dated March 26, 2008 filed as Exhibit 10.1 to AMD's Quarterly Report on Form 10-Q for the period ended September 26, 2009, is hereby incorporated by reference. 10.36 Sale of Receivables (With Program Fees) Supplier Agreement between AMD International Sales...

  • Page 132
    ... Shareholders' Agreement by and among Advanced Micro Devices, Inc., Advanced Technology Investment Company LLC, ATIC International Investment Company LLC and GLOBALFOUNDRIES Inc. dated December 27, 2010 filed as Exhibit 10.44(a) to AMD's Annual Report on Form 10-K for the fiscal year ended December...

  • Page 133
    ... Micro Devices, Inc. dated January 10, 2011 filed as Exhibit 10.57 to AMD's Annual Report on Form 10-K for the period ended December 25, 2010 is hereby incorporated by reference. Letter Agreement between Advanced Micro Devices, Inc., GLOBALFOUNDRIES, Inc., Advanced Technology Investment Company...

  • Page 134
    ...2011. List of AMD subsidiaries. Consent of Ernst & Young LLP, independent registered public accounting firm for Advanced Micro Devices, Inc. Power of Attorney. Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of the Chief Financial...

  • Page 135
    ..., thereunto duly authorized. February 23, 2012 ADVANCED MICRO DEVICES, INC. By: /S/ THOMAS J. SEIFERT Thomas J. Seifert Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 136
    SCHEDULE II ADVANCED MICRO DEVICES, INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 26, 2009, December 25, 2010 and December 31, 2011 (In millions) Additions Charged (Reductions Credited) To Operations Balance Beginning of Period Deductions(1) Balance End of Period Allowance for ...

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    AMD-31211I