AMD 2013 Annual Report Download - page 111

Warranties and Indemnities
The Company generally warrants that its products sold to its customers will conform to the Company’s
approved specifications and be free from defects in material and workmanship under normal use and service for
one year. Subject to certain exceptions, the Company also offers a three-year limited warranty to end users for
only those CPU and AMD A-Series APU products that are commonly referred to as “processors in a box” and for
PC workstation products. The Company 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 systems at the commercial and/or embedded markets.
Changes in the Company’s estimated liability for product warranty during the years ended December 28,
2013 and December 29, 2012 are as follows:
December 28,
2013
December 29,
2012
(In millions)
Beginning balance ................................... $16 $20
New warranties issued during the period .................. 27 28
Settlements during the period .......................... (25) (30)
Changes in liability for pre-existing warranties during the
period, including expirations ......................... (1) (2)
Ending balance ...................................... $17 $16
In addition to product warranties, the Company, from time to time in its normal course of business,
indemnifies other parties, with whom it enters into contractual relationships, including customers, lessors and
parties to other transactions with the Company, with respect to certain matters. In these limited matters, the
Company has agreed to hold certain third parties harmless against specific types of claims or losses, such as
those arising from a breach of representations or covenants, third-party claims that the Company’s products when
used for their intended purpose(s) and under specific conditions infringe the intellectual property rights of a third
party, or other specified claims made against the indemnified party. It is not possible to determine the maximum
potential amount of liability under these indemnification obligations due to the unique facts and circumstances
that are likely to be involved in each particular claim and indemnification provision. Historically, payments made
by the Company under these obligations have not been material.
NOTE 17: Contingencies
Securities Class Action
On January 15, 2014, a class action lawsuit captioned Hatamian v. AMD, et al., C.A. No. 3:14-cv-00226 was
filed against the Company in the United States District Court for the Northern District of California. The
complaint purports to assert claims against the Company and certain individual officers for alleged violations of
Section 10(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10b-5 of the
Exchange Act. The plaintiff seeks to represent a proposed class of all persons who purchased or otherwise
acquired AMD common stock during the period October 27, 2011 through October 28, 2012. The complaint
seeks damages allegedly caused by alleged materially misleading statements and/or material omissions by the
Company and the individual officers regarding our 32nm technology and “Llano” product, which statements and
omissions, the plaintiffs claim, allegedly operated to inflate artificially the price paid for AMD’s common stock
during the period. The complaint seeks unspecified compensatory damages, attorneys’ fees and costs. Based
upon information presently known to the Company’s management, the Company believes that the potential
liability, if any, will not have a material adverse effect on our financial condition, cash flows or results of
operations.
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