AMD 2013 Annual Report Download - page 84

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consideration of this waiver, the Company agreed to pay GF a fee of $320 million. As a result, the Company
recorded a lower of cost or market charge of $273 million for the write-down of inventory to its market value in
the fourth quarter of 2012. The cash impact of this $320 million fee was paid over several quarters, with $80
million paid on December 28, 2012, $40 million paid on April 1, 2013 and $200 million paid on December 31,
2013.
The expenses related to GF’s wafer manufacturing were $962 million, $1.2 billion and $904 million in
2013, 2012 and 2011, respectively. The expenses related to GF’s research and development activities were $16
million, $49 million and $79 million for 2013, 2012 and 2011, respectively.
NOTE 4: Acquisition
On March 23, 2012, the Company acquired SeaMicro, Inc. (SeaMicro), a privately held company that
produced energy-efficient, high-bandwidth microservers. At the time of the acquisition of SeaMicro, AMD
planned to accelerate its strategy to deliver disruptive server technology to its OEM customers serving Cloud-
centric data centers.
The total consideration paid to acquire SeaMicro was $312 million, not including cash acquired of $19
million. In addition, the Company incurred $6 million in transaction costs, which were included in marketing,
general and administrative expenses on the Company’s consolidated statement of operations. The Company paid
$293 million in cash to the holders of all outstanding shares of SeaMicro capital stock. As part of the acquisition,
the Company assumed all outstanding vested and unvested SeaMicro stock options and unvested restricted stock
held by continuing SeaMicro employees as of March 23, 2012. The assumed options were exchanged for
approximately 1,652,000 vested and 4,792,000 unvested AMD stock options. The assumed restricted stock was
exchanged for approximately 322,000 the Company restricted shares. The stock options and restricted shares
continue to have the same terms and conditions as under SeaMicro’s option plan. The fair value attributable to
pre-combination employee service as of the March 23, 2012 closing for the stock options and restricted shares
assumed, which was part of the consideration paid to acquire SeaMicro, was $19 million. The fair value for the
stock options assumed was determined using a binomial option-pricing valuation model.
The total cash consideration of $293 million included $29 million deposited into an escrow account as
security for any breaches by SeaMicro of representations, warranties and covenants under the acquisition
agreement. The escrow funds, less amounts of any valid indemnification claims, were disbursed by the escrow
agent to the former stockholders of SeaMicro in March 2013.
The acquisition was accounted for using the purchase method of accounting in accordance with Accounting
Standard Codification (ASC) 805, Business Combinations. Accordingly, the total consideration was assigned to
the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values
as of the acquisition date. Fair values were determined by the Company’s management based on information
available at the date of acquisition. After the closing of the acquisition, the results of operations of SeaMicro are
included in the Computing Solutions segment in the Company’s consolidated financial statements.
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