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FORM 10-K
ADVANCED MICRO DEVICES INC - amd
Filed: March 01, 2007 (period: December 31, 2006)
Annual report which provides a comprehensive overview of the company for the past year

Table of contents

  • Page 1
    FORM 10-K ADVANCED MICRO DEVICES INC - amd Filed: March 01, 2007 (period: December 31, 2006) Annual report which provides a comprehensive overview of the company for the past year

  • Page 2
    ... AND SUPPLEMENTARY DATA CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES OTHER INFORMATION PART III ITEM 10. ITEM 11. ITEM 12. ITEM 13. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE EXECUTIVE COMPENSATION SECURITY OWNERSHIP...

  • Page 3
    ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES SIGNATURES EX-10.36 (THIRD AMENDMENT AND RESTATEMENT OF "S" PROCESS DEVELOPMENT AGREEMENT) EX-21 (LIST OF AMD SUBSIDIARIES) EX-23.A (CONSENT OF ERNST YOUNG LLP) EX-23.B (CONSENT OF ERNST YOUNG ...

  • Page 4
    ... 30, 2006, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $10.6 billion based on the reported closing sale price of $24.42 per share as reported on the New York Stock Exchange on June 30, 2006, which was the last business day of...

  • Page 5
    ... DIRECTORS, EXECUTIVE 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 MARKET FOR...

  • Page 6
    ...average selling prices; (4) our overall competitive position and the competitiveness of our current and future products; (5) our ability to expand our capacity and effect transitions to more advanced manufacturing process technologies, consistent with our current plans in terms of timing and capital...

  • Page 7
    ... New York Stock Exchange under the symbol "AMD." Our mailing address 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...

  • Page 8
    ... our acquisition of ATI in October 2006, we began to supply 3D graphics, video and multimedia products and chipsets for desktop and notebook PCs, professional workstations, and servers as well as products for consumer electronic devices such as mobile phones, digital TVs and game consoles. Therefore...

  • Page 9
    ... chain management) and business intelligence. They can also be used in workstation applications such as engineering and digital content creation software and other information technology infrastructure applications such as intensive Web serving and messaging. 4 Source: ADVANCED MICRO DEVIC, 10...

  • Page 10
    ...-core x86 processors for servers, which we expect to begin shipping in mid-2007, will incorporate four processor cores on a single die of silicon. DDR2, or double data rate two, is a type of random access memory technology used for high speed storage of the working data of a computer. Notebook PCs...

  • Page 11
    ...-class products that include embedded server-class products. Customers use commercial client products to address specialized needs within a variety of industries, including computer devices such as thin clients, single board computers, blade PCs, points of sale terminals, commercial value clients...

  • Page 12
    ...years as the performance of integrated chipsets has advanced. Also, customers of graphics products such as original equipment manufacturers, or OEMs, and PC system integrators, or SIs, who are continually pressured to meet lower price and power consumption targets 7 Source: ADVANCED MICRO DEVIC, 10...

  • Page 13
    ... features and price-performance characteristics for the enthusiast, performance, mainstream and value categories of the desktop PC market. These products support our CrossFireâ„¢ dual-GPU technology, first introduced in May 2005. Crossfire technology increases graphics processing power and speed...

  • Page 14
    ... market, semiconductor graphics suppliers work alongside game console manufacturers to enhance the visual experience for users of sophisticated video games. Consumer Electronics Products We continue to leverage our core technology, visual processing expertise and power management know-how to meet...

  • Page 15
    ... and power saving technologies. We offer products for each category of the mobile phone media processor market: entry level, feature phones, performance phones and fully loaded multimedia and gaming phones. The AMD Imageon video engine enables a mobile digital camcorder/player and supports advanced...

  • Page 16
    ... for desktop and notebook PCs as well as film, broadcast and music professional artists that use AMD64 technology. Our product brands for our embedded processors consist of AMD Geode processors. We also sell low-power versions of our AMD Athlon, AMD Turion, AMD Sempron and AMD Opteron processors as...

  • Page 17
    ...-based strength in the market. They usually operate on short design cycles and can respond quickly with new technologies. SIs often use discrete graphics solutions as a means to differentiate their products and add value to their customers. 12 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 18
    ... and sell new products or enhanced versions of existing products on a timely basis and at competitive prices, while reducing our manufacturing costs. Competition in the Microprocessor Market Intel Corporation has dominated the market for microprocessors for many years. Intel's market power and...

  • Page 19
    ...processing functionality in mobile phones. For certain value categories of the market, baseband processor vendors are integrating the multimedia processing required for feature-rich mobile phones. Baseband processor vendors incorporating this basic level of graphics processing include Analog Devices...

  • Page 20
    ... respect to graphics and chipsets and products for consumer electronics devices, our primary research and development objective is to develop products and technologies that meet the ever-changing demands of the PC and consumer electronics industries on a timely basis so as to meet market windows. We...

  • Page 21
    ... and China. Due to the rapid pace of technological change in the graphics industry, our strategy is to focus on developing the newest generation of products that meet market and customer requirements on a timely basis so as to meet each market window. Manufacturing, Assembly and Test Facilities We...

  • Page 22
    ... Precision Industries and STATS-Chippac, who package and test the final application-specific integrated circuit. We outsource board-level graphics product manufacturing to third-party manufacturers. These include Celestica, Fairway and PC Partner with locations in China. Our facility in Markham...

  • Page 23
    ... included patents and patent applications covering Flash memory products and technology, the processes necessary to manufacture Flash memory products, and the operation and control of Flash memory products. We reserved rights, on a royalty free basis, to practice the contributed patents and...

  • Page 24
    ... the close of such transaction are greater than one and one third of the assets or market value of such party prior to such transaction. Backlog We manufacture and sell standard lines of products. Consequently, a significant portion of our sales are made from inventory on a current basis. Sales are...

  • Page 25
    ... offering reasonably good graphics performance for most mainstream PCs. The success of our graphics business is dependent, in part, upon the success of our integrated chipset products. If our graphics products do not successfully address the discrete GPU and integrated chipset markets, our graphics...

  • Page 26
    ... 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 will not develop new technologies, products or processes that render our products uncompetitive or...

  • Page 27
    ... ability to continue to manufacture microprocessors using advanced process technologies. The success of our business is dependent upon our ability to introduce products on a timely basis with required features and performance levels that provide value to our customers and support and coincide with...

  • Page 28
    ... technological changes, frequent product introductions and aggressive pricing by competitors. We believe that the main factors that determine our competitiveness are product quality, power consumption, reliability, speed, size (or form factor), cost, selling price, adherence to industry standards...

  • Page 29
    ... development of 64-bit software applications and applications that can take advantage of the functionality of our multi-core processors; • our ability to produce these processors in a timely manner using advanced process technologies, in the volume and with the performance and feature set required...

  • Page 30
    ... technology at their facilities on a timely basis. In addition, the additional capacity gained through the use of 300-millimeter wafers at Fab 36 and our plans to increase capacity at Fab 36 and convert Fab 30 into a 300-millimeter wafer manufacturing facility play a 25 Source: ADVANCED MICRO DEVIC...

  • Page 31
    ... on a limited number of foreign companies to supply the majority of certain types of integrated circuit packages for our microprocessor products. Similarly, certain non-proprietary materials or components such as memory, PCBs, substrates and capacitors 26 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 32
    ... to future increases or changes in OEM demand for our products, our business could be materially adversely affected. Industry overcapacity could cause us to under-utilize our microprocessor manufacturing facilities and have a material adverse effect on us. Both we and our competitor, Intel, have...

  • Page 33
    ... their software applications to take advantage of our innovations and customers may not purchase PCs with our microprocessors. If we fail to retain the support of Microsoft, our ability to market our microprocessors would be materially adversely affected. 28 Source: ADVANCED MICRO DEVIC, 10...

  • Page 34
    ... plan to make approximately $2.5 billion of capital expenditures, primarily related to expanding production capacity at Fab 36, beginning the conversion of Fab 30 from manufacturing on 200-millimeter wafers to 300-millimeter wafers and purchasing equipment for a new facility to support bump and test...

  • Page 35
    ...financial ratios and tests can be affected by events beyond our control. We cannot assure you that we will meet those requirements. A breach of any of these covenants, financial ratios or tests could result in a default under the applicable agreement. 30 Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 36
    ... not be fully compatible with some or all industry-standard software and hardware. Further, we may be unsuccessful in correcting any such compatibility problems in a timely manner. If our customers are unable to achieve compatibility with software or hardware after our products are shipped in volume...

  • Page 37
    ... of our manufacturing facilities. In addition, we rely on a third party in India 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 operations...

  • Page 38
    ... graphics and chipset products and products for consumer electronics devices are manufactured, assembled and tested by independent third parties in the Asia-Pacific region and inventory related to those products is stored there. We also have international sales operations and as part of our business...

  • Page 39
    ... laws, trade protection measures and import or export licensing requirements; • difficulties in protecting our intellectual property; • difficulties in achieving headcount reductions; • changes in foreign currency exchange rates; • restrictions on transfers of funds and other assets of our...

  • Page 40
    ... related to graphics processing units and cards. We also sell products to consumers, which could increase our exposure to consumer actions such as product liability claims. Any claim that is successfully asserted against us may cause us to pay substantial damages. 35 Source: ADVANCED MICRO DEVIC...

  • Page 41
    ... may produce sudden changes in demand, which may result in excess inventory. Other regulatory requirements potentially affecting our manufacturing processes and the design and marketing of our products are in development throughout the world. We have management 36 Source: ADVANCED MICRO DEVIC, 10...

  • Page 42
    .... Nearly all product assembly and final testing of our microprocessor products is performed at manufacturing facilities in China, Malaysia and Singapore. The independent foundries used to manufacture our graphics and chipset products and products for consumer electronics devices are located in Hsin...

  • Page 43
    ...amounts of Flash memory content in some of these products. In fiscal 2005 and fiscal 2006, sales to embedded Flash memory customers drove a significant portion of Spansion's sales. If demand for mobile phones or products in the embedded portion of the Flash memory market, or the Flash memory content...

  • Page 44
    ...or may choose to utilize more advanced manufacturing process technologies than Spansion uses today to offer products competitive to Spansion's at a lower cost. If floating gate NAND vendors continue to increase their share of the Flash memory market, Spansion's market share may decrease, which would...

  • Page 45
    ... to address the increasing demand for higher density data optimized Flash memory by offering products based on its new MirrorBit ORNAND and MirrorBit Quad architectures. The success of these architectures requires that Spansion timely and cost effectively develop, manufacture and market products...

  • Page 46
    ...unable to obtain foundry services at competitive rates or to timely and efficiently ramp production on 300-millimeter wafers, it will not achieve anticipated cost savings associated with this technology and its gross margins could decline. Even if Spansion is successful in implementing this capacity...

  • Page 47
    ... average selling prices for Spansion's products may also be adversely affected by a significant decline in the price for NAND products. Such a decline may result in downward price pressure in the overall Flash memory market, which would adversely affect Spansion. 42 Source: ADVANCED MICRO DEVIC, 10...

  • Page 48
    ...introduce new products, new manufacturers enter the market, industry-wide production capacity increases and competitors aggressively price their Flash memory products to increase market share. Competition also may increase if NOR memory vendors merge, if NAND memory vendors acquire NOR businesses or...

  • Page 49
    ..., Spansion must decrease its manufacturing costs and develop, introduce and sell products that meet the increasing demand for greater Flash memory content in mobile phones, consumer electronics and automotive applications, among other markets, at competitive prices. If Spansion is unable to...

  • Page 50
    ... 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 the United States, Latin America, Europe and Asia. These leases expire at varying dates through 2018. We also...

  • Page 51
    ..., we will be permitted to develop evidence of Intel's exclusionary practices wherever they occur, including practices foreclosing AMD from foreign customers or in foreign market segments. However, the court's ruling limits our damages to lost sales in 46 Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 52
    ...misrepresentations about its business and future outlook. It is alleged that as a result of the failure to disclose material facts and the alleged misrepresentations, ATI's common stock traded at artificially inflated prices until the stock price dropped on the news of ATI's third quarter results in...

  • Page 53
    ... 2006, AMD received a subpoena for documents and information in connection with the U.S. Department of Justice (DOJ) criminal investigation into potential antitrust violations related to graphics processing units and cards. AMD entered the graphics processor business following our acquisition of ATI...

  • Page 54
    ... 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 Fiscal year ended December 31, 2006 First quarter Second quarter Third quarter...

  • Page 55
    ... December 31, 2006. The past performance of our common stock is no indication of future performance. Comparison of Five Year Total Return This graph was plotted using the following data: Base Period 12/28/01 Years Ending 12/26/04 12/25/05 Company / Index 12/29/02 12/28/03 12/31/06 AMD S&P 500...

  • Page 56
    ...FINANCIAL DATA Five Years Ended December 31, 2006 (In millions except per share amounts) Net Revenue Cost of sales Gross margin Research and development Marketing, general and administrative In-process research and development Amortization of acquired intangible assets and other integration charges...

  • Page 57
    ... to the IPO of Spansion Inc (Spansion Related Minority Interest). Represents a write off of in-process research and development in connection with the ATI acquisition. Represents amortization of acquisition related intangible assets acquired as part of the ATI acquisition and charges incurred to...

  • Page 58
    ... our acquisition of ATI in October 2006, we began to supply 3D graphics, video and multimedia products and chipsets for desktop and notebook PCs, professional workstations, and servers as well as products for consumer electronic devices such as mobile phones, digital TVs and game consoles. Therefore...

  • Page 59
    ... of the Forbes Global 2000 were using AMD64 technology, and existing customers continued to expand the number of AMD-based solutions targeting the commercial market. Also, compared to 2005, sales of our mobile and server processor products grew faster than sales of our desktop products. We believe...

  • Page 60
    ... all of the outstanding shares, stock options, restricted stock units and other stock-based awards of ATI in exchange for: Cash 58 million shares of AMD common stock Fair value of vested options and restricted stock units issued Acquisition related transaction costs Total purchase price $ $ 4,263...

  • Page 61
    ... in-process projects, net of all contributory asset returns. The approach includes consideration of the importance of each project to the overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products. The revenue estimates used to value the purchased IPR...

  • Page 62
    ... technology in ATI's discrete GPU products, integrated chipset products, handheld products, and digital TV products divisions. We expect this intangible asset to have a useful life of five years. Game console royalty agreements represent agreements existing as of October 24, 2006 with video game...

  • Page 63
    ... 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 and net realizable value. If we anticipate future demand or market...

  • Page 64
    ... servers and workstations and AMD chipset products; • the Memory Products segment, which included Spansion Flash memory products; and • the Personal Connectivity Solutions segment, which consisted of embedded processors for global commercial and consumer markets. 59 Source: ADVANCED MICRO DEVIC...

  • Page 65
    ... includes embedded processors and related revenue; • the Graphics and Chipsets segment, which includes 3D graphics, video and multimedia products and chipsets sold by ATI prior to the acquisition for use in desktop and notebook PCs, including home media PCs, professional workstations and servers...

  • Page 66
    ..., AMD Opteron dual-core processors for servers and workstations in April 2005 and AMD Athlon 64 dual-core processors for desktop PCs in May 2005 helped drive increasing customer adoption of our products. The increase in average selling prices was primarily due to increased sales of our higher priced...

  • Page 67
    ... in 2005. In addition, Memory Products net revenue was adversely impacted due to a decrease of 28 percent in average selling prices in 2005 compared to 2004, partially offset by an increase of 14 percent in unit shipments in 2005 compared to 2004. Net 62 Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 68
    ... employee stock-based compensation expense and profit sharing expense of $104 million. The ATI acquisition-related charges include the in-process research and development write-off of $416 million, amortization of acquired intangible assets of $47 million, cost of fair value adjustments to acquired...

  • Page 69
    ...October 25, 2006 through December 31, 2006. Historically, the ATI business had lower gross margins as compared to AMD. Gross margin was also adversely impacted by approximately one percent due to the costs of fair value adjustments related to the inventory we acquired through the ATI acquisition. To...

  • Page 70
    ... in 2006 relates to projects acquired in connection with the acquisition of ATI. Amortization of acquired intangible assets and integration charges in 2006 includes amortization of $47 million and integration charges of $32 million. See "Part II, Item 7, MD&A-ATI 65 Source: ADVANCED MICRO DEVIC, 10...

  • Page 71
    ...) to further align our cost structure to industry conditions resulting from weak customer demand and industry-wide excess inventory. The 2002 Restructuring Plan resulted in the consolidation of facilities, primarily at our Sunnyvale, California site and at sales offices worldwide. We vacated and are...

  • Page 72
    ... of finance charges related to the Fab 36 Term Loan, partially offset by a gain of $10 million associated with Spansion LLC's repurchase of its 12.75% Senior Subordinated Notes due 2016 and other miscellaneous items of income, net totaling $9 million. 67 Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 73
    ... book value per share before and after the IPO multiplied by the number of shares of Spansion's common stock owned by us. In November 2006, we sold 21,000,000 shares of Spansion's Class A common stock in an underwritten public offering. We received $278 million in net proceeds from the offering and...

  • Page 74
    ... of our prior history of losses. In 2006 the net valuation allowance increased by $305 million primarily to provide valuation allowance for tax assets in Canada and for losses in the U.S. as a result of our purchase accounting related to the ATI acquisition. If we in the future determine that it...

  • Page 75
    ...the single option (i.e. straight-line) method. Also, upon adoption of SFAS 123R, we changed the method of valuing stock option awards from the Black-Scholes option pricing model, which was previously used for our pro forma information disclosures of stock-based compensation expense as required under...

  • Page 76
    ... vesting of all stock options outstanding under the 2004 Equity Incentive Plan and our prior equity compensation plans that had exercise prices per share higher than the closing price of our stock on April 27, 2005, which was $14.51. Options to purchase approximately 12 million shares of our common...

  • Page 77
    ... grants and subsidies of $151 million. The net changes in operating assets at December 31, 2006 compared to December 25, 2005 included a decrease in payables to related parties of $229 million because we no longer ship products and invoice customers on behalf of Spansion. Prior to the second quarter...

  • Page 78
    ... 36 Term Loan; proceeds of $495 million from the sale of our common stock in an equity offering, issuance of stock under our Employee Stock Purchase Plan and the exercise of employee stock options of $231 million; and capital investment grants and allowances from the Federal Republic of Germany and...

  • Page 79
    ... we only included the minimum volume of purchase commitments in the table above. Also, purchase orders for goods and services that are cancelable upon notice and without significant penalties are not included in the amounts above. 74 (2) (3) (4) Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 80
    ...flow; and (vi) 100 percent of net cash proceeds from sale of capital stock of Spansion Inc. See "Part II, Item 7, MD&A-Liquidity," for additional information on the definition of "excess cash flow." The October 2006 Term Loan contains certain covenants that limit, among other things, our ability and...

  • Page 81
    ... Our new 300-millimeter wafer fabrication facility, Fab 36, is located in Dresden, Germany adjacent to our other wafer manufacturing facility, Fab 30. Fab 36 is owned by AMD Fab 36 Limited Liability Company & Co. KG (or AMD Fab 36 KG), a German limited partnership. We control the management of AMD...

  • Page 82
    ..., our credit rating is at least B3 by Moody's and B- by Standard & Poor's, and no event of default has occurred, the only financial covenant that AMD Fab 36 KG is required to comply with is a loan to fixed asset value covenant. Specifically, the loan to fixed 77 Source: ADVANCED MICRO DEVIC, 10...

  • Page 83
    ... of the total outstanding amount until such time as either the credit rating increases to at least Ba3 by Moody's and BB- by Standard & Poor's or the minimum cash balances are equal to the total outstanding amounts. AMD Fab 36 KG pledged substantially all of its current and future assets as security...

  • Page 84
    ... also have a put option in the event they are outvoted at AMD Fab 36 KG partners' meetings with respect to certain specified matters such as increases in the partners' capital contributions beyond those required by the partnership agreements, investments 79 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 85
    Table of Contents significantly in excess of the business plan, or certain dispositions of the limited partnership interests of AMD Fab 36 Holding and AMD Fab 36 Admin. The purchase price under the put option is the partner's capital account balance plus accumulated or accrued profits due to such ...

  • Page 86
    ...in a private offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. On April 22, 2005, we exchanged these notes for publicly registered notes which have substantially identical terms as the old notes except that the 81 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 87
    ... Loan, See the section entitled "October 2006 Term Loan," above for more information. We may elect to purchase or otherwise retire the remaining principal outstanding under our 7.75% Notes with cash, stock or other assets from time to time in open market or privately negotiated transactions, either...

  • Page 88
    ... related to the Fab 30 and Fab 36 projects and a $18 million deferred gain as a result of the sale and leaseback of our corporate marketing, general and administrative facility in Sunnyvale, California in 1998. Capital Lease Obligations As of December 31, 2006, we had aggregate outstanding capital...

  • Page 89
    ... acquired by Toppan Printing Co., Ltd. and became a wholly owned subsidiary of Toppan, named Toppan Photomasks, Inc. We procure advanced photomasks from AMTC and use them in manufacturing our microprocessors. To finance the project, BAC and AMTC entered into a $158 million revolving credit facility...

  • Page 90
    ... Exchange Commission reports and filings. In a seasonally down first quarter, we expect revenue to be in the range of $1.6 billion to $1.7 billion. Also, during the first quarter of 2007, we expect operating expenses, which include research and development expenses 85 Source: ADVANCED MICRO DEVIC...

  • Page 91
    ... and stock option expense. ATI acquisition related charges will be approximately $120 million in the first quarter, of which $90 million is included in the operating expense amount previously mentioned and $30 million will be recorded to cost of sales. We expect employee stock-based compensation...

  • Page 92
    ... and market risk. Except for the October 2006 Term Loan, which was used to fund a portion of the ATI acquisition, we generally use proceeds from borrowings primarily to support general corporate purposes, including capital expenditures and working capital needs. 87 Source: ADVANCED MICRO DEVIC, 10...

  • Page 93
    ... and Canadian dollars. For example, some fixed asset purchases and certain expenses of our German subsidiaries, AMD Saxony and AMD Fab 36 KG, are denominated in euros while sales of products are denominated in U.S. dollars. Additionally, as a result of our acquisition of ATI in October 2006, some of...

  • Page 94
    ... value gain (loss) Foreign currency forward contracts: Japanese yen Canadian dollar Euro Foreign currency option contracts: Euro Total: 89 $ 26 117 1,099 - 1,242 117.62 1.1181 1.3036 - $ - (4) 13 - 9 $ - - 239 327 566 - - 1.2020 1.3002 $ - - 3 (13) (10) $ $ $ $ Source: ADVANCED MICRO...

  • Page 95
    ... DATA Advanced Micro Devices, Inc. and Subsidiaries Consolidated Statements of Operations Three Years Ended December 31, 2006 2006 2005 (In millions, except per share amounts) 2004 Net revenue Net revenue to related party (see Note 5) Total net revenue Cost of sales Gross margin Research...

  • Page 96
    ... of Contents Advanced Micro Devices, Inc. and Subsidiaries Consolidated Balance Sheets December 31, December 25, 2006 2005 (In millions, except par value amounts) ASSETS Current assets: Cash and cash equivalents Marketable securities Spansion senior subordinated notes (see Note 4) Total cash and...

  • Page 97
    ...Advanced Micro Devices, Inc. and Subsidiaries Consolidated Balance Sheets-(Continued) December 31, December 25, 2006 2005 (In millions, except par value amounts) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accounts payable to Spansion (see Note 5) Accrued compensation...

  • Page 98
    ... net of taxes of $0 Total other comprehensive loss Total comprehensive loss Issuance of shares: Employee stock plans Common stock issued in public offering, net of issuance cost Common stock issued for ATI Acquisition (see Note 3) Fair value of vested options and restricted stock units issued to ATI...

  • Page 99
    ... grant and subsidy income Net loss (gain) on disposal of property, plant and equipment Compensation recognized under employee stock plans Other Changes in operating assets and liabilities: Accounts receivable Receivable from related parties Inventories Prepaid expenses and other current assets...

  • Page 100
    ... Proceeds from limited partners' contribution Change in compensating balance Proceeds from issuance of common stock, net of issuance costs Proceeds from issuance of common stock under stock-based compensation plans Other Net cash provided by financing activities Effect of exchange rate changes on...

  • Page 101
    ... 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 such as mobile phones, digital TVs and game consoles. NOTE 2: Summary of Significant Accounting...

  • Page 102
    ... the manufacturing code date. In addition, some agreements with distributors may contain standard stock rotation provisions permitting limited levels of product returns. Accordingly, the Company defers the gross margin resulting from the deferral of both revenue and related product costs from sales...

  • Page 103
    ... in value of forecasted euro and Canadian dollar denominated cash flows resulting from these transactions, the Company has instituted a foreign currency cash flow hedging program. Under this program, the Company purchases foreign currency forward contracts and sells 98 Source: ADVANCED MICRO DEVIC...

  • Page 104
    ... products. The Company has offered extended limited warranties to certain customers of "tray" microprocessor products who have written agreements with the Company and target their computer systems at the commercial and/or embedded markets. The Company generally warrants that its graphics and chipset...

  • Page 105
    ...currency is the U.S. dollar, assets and liabilities denominated in non-U.S. dollars have been remeasured into U.S. dollars at current exchange rates for monetary assets and liabilities and historical exchange rates for non monetary assets and liabilities. Net revenue, cost of sales and expenses have...

  • Page 106
    ... $1 million The Company incurred a net loss for 2006. Potential dilutive common shares of approximately 55 million for 2006, which included both shares issuable upon the assumed exercise of outstanding employee stock options and the assumed conversion of outstanding convertible securities, were not...

  • Page 107
    ...12 for a further discussion on stock-based compensation). The Company's determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective...

  • Page 108
    ...pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company's employee stock options have certain characteristics that are significantly different from traded options, and because changes...

  • Page 109
    ... and other stock-based awards of ATI in exchange for: Cash 58 million shares of the Company's common stock Fair value of vested options and restricted stock units issued Acquisition related transaction costs Total purchase price 104 $ $ 4,263 1,172 144 25 5,604 Source: ADVANCED MICRO DEVIC, 10...

  • Page 110
    ... values as of October 24, 2006 as set forth below: (In millions) Cash and marketable securities Accounts receivable Inventories Goodwill Developed product technology Game console royalty agreement Customer relationships Trademarks and trade names Customer backlog In-process research and development...

  • Page 111
    ... in-process projects, net of all contributory asset returns. The approach includes consideration of the importance of each project to the overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products. The revenue estimates used to value the purchased IPR...

  • Page 112
    ... business combination accounting effect on ATI inventories acquired, write off of in-process research and development and integration charges as well as the recurring effect from amortization of acquired intangible assets, stock-based compensation charges for unvested stock awards assumed...

  • Page 113
    ... 31, 2006 Cost of ATI Acquisition Related Intangible Accumulated Assets Amortization (In millions) Weighted Average Amortization Period (in months) Net Developed product technology Game console royalty agreements Customer relationships Trademarks and trade names Customer backlog Total 60 60...

  • Page 114
    ...), amounted to approximately $361 million. The fair value of this investment was approximately $409 million based on closing market price of Spansion's common stock on December 29, 2006, the last trading day of the fiscal year. Purchase of Spansion LLC 12.75% Senior Subordinated Notes Due 2016 On...

  • Page 115
    ... of certain stock awards as indicated above, there were approximately 684,000 unvested AMD stock options and restricted stock units still held by Spansion employees which were subject to variable accounting. In November 2006, subsequent to the sale of shares in the Offering, the Company's ownership...

  • Page 116
    ... adopted a new pension plan and changed the formula to a cash balance formula. Assets and obligations were transferred from the Fujitsu Group Employee Pension Fund to this new Spansion Japan pension plan. The Company's share of the pension cost and the unfunded pension liability related to these...

  • Page 117
    ... the Company recorded sales of Spansion's Flash memory products sold by the Company on behalf of Spansion and the related cost of sales on a net basis on its condensed consolidated statements of operations. As a result, the net impact to the Company's net revenue and cost of sales was zero. Accounts...

  • Page 118
    ...follows: Gross Gross Unrealized Unrealized gains losses (In millions) Amortized Cost Fair Market Value 2006 Cash equivalents: Commercial paper Money market funds Time deposits Total cash equivalents Marketable securities: Auction rate preferred stock Time deposits Total marketable securities Long...

  • Page 119
    ... 10 percent total consolidated accounts receivable balance for 2006. However, the Company does not believe the receivable balance from these customers represents a significant credit risk based on past collection experience. The Company manages credit risk through credit approvals, credit limits and...

  • Page 120
    ... income Inventory valuation Accrued expenses not currently deductible In-process research and development Acquired intangibles U.S. federal and state tax credit carryovers Foreign capitalized research and development costs Foreign research and development ITC credits Other Total deferred tax assets...

  • Page 121
    ... of these credits results from excess stock option deduction benefits in connection with our adoption of SFAS 123R. The Company will use the with-and-without method to determine when these benefits are realized. Accordingly the Company will increase capital in excess of par value and reduce...

  • Page 122
    ... 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 and China currently operate under tax holidays, which will expire in whole or in part at various dates through 2014...

  • Page 123
    ... sale of capital stock of Spansion Inc. Prepayment of the October 2006 Term Loan from 50 percent of "excess cash flow" as used in the preceding clause (v), is intended to reach the Company's cash income that is not actually applied to certain limited uses that merit 118 Source: ADVANCED MICRO DEVIC...

  • Page 124
    ... or a change of control (as defined in the October 2006 Term Loan). In connection with the October 2006 Term Loan, the Company and its subsidiaries, AMD International Sales & Service, Ltd., AMD (U.S.) Holdings, Inc., AMD US Finance, Inc., ATI Research Silicon Valley Inc., ATI Research, Inc., and ATI...

  • Page 125
    ...as is required by the Indenture, dated as of October 29, 2004, between the Company and Wells Fargo, as trustee. In November 2006, the Company repaid $278 million of the amounts outstanding under the October 2006 Term Loan out of the net cash proceeds from the sale of Spansion common stock. (See Note...

  • Page 126
    ... are equal to the total outstanding amounts. AMD Fab 36 KG pledged substantially all of its current and future assets as security under the Fab 36 Loan Agreements, the Company pledged its equity interest in AMD Fab 36 Holding and AMD Fab 36 LLC, AMD 121 Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 127
    ... on an annualized basis for the two most recent fiscal quarters ending prior to December 31, 2006 Also on April 21, 2004, AMD, AMD Fab 36 KG, AMD Fab 36 LLC, AMD Fab 36 Holding GmbH, a German company and wholly owned subsidiary of AMD that owns substantially all of the Company's limited partnership...

  • Page 128
    ... beyond those required by the partnership agreements, investments significantly in excess of the business plan, or certain dispositions of the limited partnership interests of AMD Fab 36 Holding and AMD Fab 36 Admin. The purchase price under the put option is the partner's capital account balance...

  • Page 129
    ... 2012. Initially, the Company amortized the grant amounts as a reduction to research and development expenses. Beginning in the first quarter of 2006, when Fab 36 began producing revenue generating products, the Company started amortizing these amounts as a reduction to cost of sales. For allowances...

  • Page 130
    ... 4, 2005, the 4.50% Notes were redeemable by the Company at the Company's option for cash at specified prices expressed as a percentage of the outstanding principal amount plus accrued and unpaid interest provided that the Company could not 125 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 131
    ...unless the last reported sale price of its common stock is at least 150 percent of the then- effective conversion price for at least 20 trading days within a period of 30 trading days ending within five trading days of the date of the redemption notice. On October 22, 2004, the Company exchanged $70...

  • Page 132
    ... under certain energy supply contracts which AMD Fab 36 KG entered into with local energy suppliers to provide Fab 36 with utilities (gas, electricity, heating and cooling) to meet the energy demand for its manufacturing requirements. The Company accounted for certain fixed payments due under these...

  • Page 133
    ...microprocessor products for desktop and mobile PCs, servers and workstations and AMD chipset products; • the Memory Products segment, which included Spansion Flash memory products; and • the Personal Connectivity Solutions segment, which consisted of embedded processors for global commercial and...

  • Page 134
    ...embedded processors and related revenue; • the Graphics and Chipsets segment, which includes 3D graphics, video and multimedia products and chipsets sold by ATI prior to the acquisition for use in desktop and notebook PCs, including home media PCs, professional workstations and servers and related...

  • Page 135
    ...nor does management evaluate operating segments using discrete asset information. The Company's operations outside the United States include both manufacturing and sales activities. The Company's manufacturing subsidiaries are located in Germany, Malaysia, Singapore and China. Its sales subsidiaries...

  • Page 136
    ...-lived assets are those assets used in each geographic area. The Company markets and sells its products primarily to a broad base of customers including third-party distributors, OEMs, ODMs, add-in-board manufacturers, system integrators, retail stores and e-commerce retailers. In 2006, net sales...

  • Page 137
    ...stock on the date of grant and (ii) restricted stock or restricted stock units, as full value awards. Following is a description of the material terms of the awards that may be granted under the 2004 Plan: Stock Options. A stock option is the right to purchase shares of AMD's common stock at a fixed...

  • Page 138
    ... capitalize stock-based compensation cost as part of the cost of an asset because the cost was insignificant. Following adoption of SFAS 123R, the Company began estimating the value of employee stock options on the date of grant using a lattice-binomial option-pricing model (lattice-binomial model...

  • Page 139
    ... years from the date of grant. The summary of the changes in restricted stock awards outstanding during the year ended December 31, 2006 is presented below: Year Ended December 31, 2006 WeightedAverage Grant Date Number of Fair Value Shares (In thousands except share price) Nonvested balance at...

  • Page 140
    ... purchase plan (ESPP) that allows eligible and participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85 percent of the lower of the fair market value on the first or the last business day of the three-month offering period. As of December 31, 2006...

  • Page 141
    ..., for pro forma disclosure purposes only, the Company estimates the fair value of its stock-based awards to employees using a Black-Scholes option pricing model. The Black-Scholes model was developed for use in estimating fair value of traded options that have no vesting restrictions and are fully...

  • Page 142
    ... a retirement savings plan, commonly known as a 401(k) plan that allows 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 matches employee contributions at a rate of 50 cents on each dollar of...

  • Page 143
    ... that the Company is required to repurchase from the unaffiliated limited partners of AMD Fab 36 KG and is exclusive of the guaranteed rate of return of an aggregate of approximately $58 million. This amount represents the payment obligation due to a supplier arising out of the purchase of equipment...

  • Page 144
    ... because the Company concluded the fair value of the guarantees is not significant after considering various factors including Spansion's credit rating, the ability of Spansion to make the payments on these obligations and the short maturity of the indebtedness. 139 Source: ADVANCED MICRO DEVIC, 10...

  • Page 145
    ...the commercial and/or embedded markets. The Company generally warrants that its graphics and chipset products and products for consumer electronics devices will be free from defects in material and workmanship under normal use and service for a period of one year, beginning on the date first sold to...

  • Page 146
    ... (the 2002 Restructuring Plan) to further align its cost structure to industry conditions resulting from weak customer demand and industry-wide excess inventory. With the exception of the exit costs consisting primarily of remaining lease payments on abandoned facilities, net of estimated sublease...

  • Page 147
    ...misrepresentations about its business and future outlook. It is alleged that as a result of the failure to disclose material facts and the alleged misrepresentations, ATI's common stock traded at artificially inflated prices until the stock price dropped on the news of ATI's third quarter results in...

  • Page 148
    ... 2006, AMD received a subpoena for documents and information in connection with the U.S. Department of Justice (DOJ) criminal investigation into potential antitrust violations related to graphics processing units and cards. AMD entered the graphics processor business following our acquisition of ATI...

  • Page 149
    ... the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Advanced Micro Devices, Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the...

  • Page 150
    ... of Contents Management's Report on Internal Control over Financial Reporting Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and...

  • Page 151
    ...control over financial reporting did not include the internal controls of ATI Technologies Inc., which is included in the 2006 consolidated financial statements of Advanced Micro Devices, Inc. and Subsidiaries and constituted $901 million and $270 million of total and net assets, respectively, as of...

  • Page 152
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Advanced Micro Devices, Inc. and Subsidiaries as of December 31, 2006 and December 25, 2005, and the related consolidated statements of operations, stockholders' equity...

  • Page 153
    ... of Memory Products segment through December 20, 2005. From December 21, 2005, the date with Spansion Inc. closed its initial public offering, through December 31, 2006, the Company used the equity method of accounting to reflect its share of Spansion's net loss and included this information as...

  • Page 154
    ... statements of Spansion Inc. as of December 31, 2006 and December 25, 2005, and for each of the three years in the period ended December 31, 2006 included in Exhibit 99 to this Annual Report (Form 10-K) are incorporated herein by reference. 149 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 155
    ..., such as this Annual Report on Form 10-K is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as...

  • Page 156
    ... further payments under the VP LTIP. The following table sets forth the bonus awards to the Executives. 2005-2006 Bonus RSUs vested Name and Position 2006 Bonus (Cash) Hector de J. Ruiz Chairman of the Board and Chief Executive Officer Thomas M. McCoy Executive Vice President, Legal Affairs and...

  • Page 157
    ...part of this report. Without limiting the foregoing, the information under the captions, "Compensation Committee Report on Executive Compensation" and "Audit Committee Report" in our 2007 Proxy Statement is not incorporated by reference in this Annual Report on Form 10-K. 152 Source: ADVANCED MICRO...

  • Page 158
    ... 192 of the Canada Business Corporations Act filed as Exhibit 2.1 to AMD's Current Report of Form 8-K dated October 24, 2006, is hereby incorporated by reference. Acquisition Agreement by and between Advanced Micro Devices, Inc. 1252986 Alberta ULC and ATI Technologies Inc. dated as of July 23...

  • Page 159
    .... AMD Executive Incentive Plan, filed as Exhibit 10.8 to AMD's Quarterly Report on Form 10-Q for the period ended July 2, 2006, is hereby incorporated by reference. Advanced Micro Devices, Inc. 2005 Long Term Incentive Plan, filed as Exhibit 10.1 to AMD's Current Report on Form 8-K dated October...

  • Page 160
    ...10.64(B) to AMD's Quarterly Report on Form 10-Q for the period ended June 26, 2005, is hereby incorporated by reference. Third Amendment to the Advanced Micro Devices, Inc. Executive Investment Account Plan dated November 9, 2005, filed as Exhibit 10.17(c) to AMD's Annual Report on Form 10-K for the...

  • Page 161
    ... Purchase Agreement, dated as of February 20, 2001, between AMD Saxony Holding GmbH and AMD Saxony Manufacturing GmbH, filed as Exhibit 10.50(1-3) to AMD's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, is hereby incorporated by reference. 156 Source: ADVANCED MICRO DEVIC...

  • Page 162
    ...Development Agreement, dated as of January 31, 2002, between AMD and United Microelectronics Corporation, filed as Exhibit 10.52 to AMD's Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the period ended March 31, 2002, is hereby incorporated by reference. 157 Source: ADVANCED MICRO DEVIC...

  • Page 163
    ... between International Business Machines Corp. and Advanced Micro Devices, Inc. effective as of December 28, 2002. Agreement between SI Investment Limited Liability Company & Co KG and M+W Zander Facility Engineering GmbH, dated November 20, 2003 filed as Exhibit 10.47 to AMD's Annual Report on Form...

  • Page 164
    ...1 to the AMD Fab 36 Management Services Agreement by and between Advanced Micro Devices, Inc., AMD Saxony Limited Liability Company & Co. KG., AMD Fab 36 Limited Liability Company & Co. KG and AMD Fab 36 Holding GmbH dated September 25, 2006 filed as Exhibit 10.1 to AMD's Quarterly Report on Form 10...

  • Page 165
    ... Limited, Advanced Micro Devices, Inc., AMD Investments, Inc., Spansion Inc. and Spansion Technology Inc. dated December 21, 2005, filed as Exhibit 10.4 to AMD's Current Report on Form 8-K dated December 15, 2005, is hereby incorporated by reference. Amended and Restated Information Technology...

  • Page 166
    ... Devices, Inc. and New York State Urban Development Corporation d/b/a Empire State Development Corporation dated December 22, 2006 filed as Exhibit 10.1 to AMD's Current Report on Form 8-K dated December 22, 2006, is hereby incorporated by reference. ATI Technologies Inc. Restricted Share Unit Plans...

  • Page 167
    ... the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date Hector de J. Ruiz * Chairman of the Board and Chief Executive Officer (Principal...

  • Page 168
    ... $ 21 18 13 $ 9 39 8 $ (12) (42) (8) $ - (2) - $ 18 13 13 Accounts (written off) recovered, net. Reduction due to change in status of Spansion from consolidated subsidiary to unconsolidated investee as a result of Spansion's IPO. 163 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 169
    EXECUTION VERSION Confidential Treatment Requested under 17 C.F.R. §§ 200.80(b)(94), 200.83 and 240.24-b-2 Third Amendment and Restatement of "S" PROCESS DEVELOPMENT AGREEMENT (effective as of December 28, 2002) between INTERNATIONAL BUSINESS MACHINES CORP. And ADVANCED MICRO DEVICES, INC. ...

  • Page 170
    ... the use of such complementary skills and know-how the Parties desire to achieve resource efficiencies and cost savings, and reduce the technical risk associated with the development of high end semiconductor processes in order to complete development of and put into production, leading edge high...

  • Page 171
    ... which produces flash memory products, provided, that such entity shall be considered an AMD FMV only so long as such ownership exists. "AMD High Performance Integrated Circuit" means an Integrated Circuit manufactured using an AMD High Performance Process. "AMD High Performance Process" means any...

  • Page 172
    EXECUTION VERSION "Background Know-How" means methods, techniques, designs, structures, software, and specifications developed or acquired by a Party outside the performance of the Process Development Projects, which such Party provides to the other Party for use in a Process Development Project ...

  • Page 173
    EXECUTION VERSION SRAM macro cells and eDRAM macros) as well as such test chips themselves used for the development work of the Process Development Projects unless specifically excluded (for the avoidance of doubt, this phrase means that such structures or macros that are specifically designated as ...

  • Page 174
    ... than Foundry Products. "eDRAM Technology" means semiconductor fabrication processes, designs and design techniques specifically developed for or directed to Embedded DRAM, regardless of the application to which it is applied. "Foundry Company(ies)" means an entity having a majority of its revenue...

  • Page 175
    ..., Industry Standard Information shall not include any eDRAM Technology derived from or used in CMOS 13SeD. ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 7 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 176
    ... or photoresists for use in the technologies developed and researched hereunder. "Net Selling Price" for each unit of a particular ASIC Product or wafers (only pursuant to Section 5.7) means the net revenue recorded by AMD (including Wholly Owned Subsidiaries and Related Subsidiaries of AMD) with...

  • Page 177
    EXECUTION VERSION "Packaging Technology" means any process, procedure, software, or hardware tools used in the packaging of integrated circuit products into single-chip packages, multi-chip packages, or any other higher levels of assembly,; provided, however "Packaging Technology" shall not include ...

  • Page 178
    EXECUTION VERSION "Qualification" means the T2 date identified in the schedule for each Process Development Project, as set forth in Exhibit B. "Related Subsidiary" shall mean a corporation, company or other entity: (a) one hundred percent (100%) of whose outstanding shares or securities (such ...

  • Page 179
    ..., unit processes, process flows, structures in silicon, test software, and specifications for equipment, chemicals, masks and consumables; Any Background Know-How provided to the Process Development Project(s) by a Party pursuant to Section 3, below. "Stand Alone Memory" means Chip Designs and...

  • Page 180
    ... the right to (i) make the decisions for such corporation, company or other entity, or (ii) vote for, designate, or Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 12 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 181
    ... wafer process development facility used for conducting the Process Development Projects is located in East Fishkill, New York. IBM shall be responsible for the operations of the IBM Development Facilities, including, but not limited to capacity, staffing, and capital purchases. Process Development...

  • Page 182
    ...and Photoresist Technology, iv) Stand Alone Memory, v) SiGe Technology, vi) Chip Designs, or vii) Post-Silicon Devices. 3.2 The Parties agree that Exhibit A also sets forth the Pre-T0 In-Scope Technical Subjects and the potential technology implementation options for each Process Development Project...

  • Page 183
    ... Leaders. Should AMD have any questions regarding the Documentation as they are transferring such Specific Results to their own 3.5 Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 15 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 184
    ...IBM having a last signature date of July 16, 2001; and (4) the Letter Agreement having a signature date of September 13, 2004. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 16 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 185
    ...: (i) For AMD: *** One AMD Place P.O. Box 3453, MS79 Sunnyvale, CA 94088-3453 Tel: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 17 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 186
    EXECUTION VERSION (ii) For IBM: *** 2070 Route 52 Hopewell Junction, New York 12533 *** Tel: *** Fax: *** Either Party may change its member of the Management Committee by written notice to the other Party. The Management Committee will conduct regular meetings on dates and at locations determined ...

  • Page 187
    ... responsibilities of the Bump Technology Project Leaders are set forth in Exhibit I. ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 19 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 188
    ... so requests, AMD shall make a compensating payment to IBM at a rate of *** ($***) U.S. Dollars per person month for each headcount below the minimum staffing level set forth in Exhibit C. AMD may, at its sole option, provide up to *** (***) Representatives to work in the Development Facilities. The...

  • Page 189
    ... In particular, AMD agrees to abide by security requirements as may apply to their Representatives while at the Development Facilities. Each Party shall provide to the other in advance a set of documents setting forth all such rules, procedures and guidelines, including any updated versions thereof...

  • Page 190
    ... Health Act ("OSHA"), applicable OSHA standards, applicable New York safety and health laws and regulations, any applicable municipal ordinances, and applicable facility safety rules of which the Party has notice, regarding the Representatives it assigns to the Process Development Project(s). 4.11...

  • Page 191
    ... Development in the Development Facilities. If the number of partners changes during the Term, then the new ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 23 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 192
    ... AMD shall be required to share the incremental costs of any changes in scope in the Process Development Projects agreed to pursuant to Section 14. Moreover, AMD shall pay IBM a royalty on all ASIC Products, at the rate of *** percent (***%) of the Net Selling Price of each unit of ASIC Product sold...

  • Page 193
    EXECUTION VERSION of AMD. The audit will be conducted by a mutually acceptable audit firm, and shall be conducted following reasonable prior written notice (at least forty-five (45) days in advance) during regular business hours at an office where such records are normally maintained and in such a ...

  • Page 194
    EXECUTION VERSION 5.7 If AMD exercises its license under Section 8.17, below, AMD agrees to pay IBM a royalty of *** percent (***%) for each wafer provided to, or purchased by, a Third Party pursuant to Section 8.17. The revenue basis for such wafers shall be the Net Selling Price of such wafers. ...

  • Page 195
    ... 12.8, AMD agrees to pay IBM a royalty of *** percent (***%) of the Net Selling Price for each eDRAM Licensed Product that embodies eDRAM Technology developed under this Agreement and is provided to, or purchased by, a Third Party if the total of such Net Selling Price is in excess of *** dollars...

  • Page 196
    .../or market the product (including products manufactured using the process technology to be developed under the Process Development Projects) at such time as it determines in its sole judgement that such action is required. Any confidential information disclosed by one Party to another in performance...

  • Page 197
    ... the receiving Party shall first have notified the disclosing Party and made a good ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 29 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 198
    ... a facility to practice such process; or 7.6.4 spice models, design-related data (netlists, GDS), device models, verification decks other than to Third Party contractors who design eDRAM or Stand Alone Memory unless such contractor is providing such assistance in an AMD or IBM facility. Such...

  • Page 199
    ... its customers respectively having a term of confidentiality of five years from the date of disclosure and limiting the use of such information to the purpose set forth herein: 7.7 process roadmap and development schedule for Process Development Projects time schedule for development of device model...

  • Page 200
    ...the AMD FMV license grants in this Section 7.7. AMD shall contractually require the AMD FMV to put procedures in place to prevent the disclosure of any Bulk CMOS or Industry Standard Information to any other owners of the AMD FMV. It is understood that employees of AMD's current flash memory partner...

  • Page 201
    ...Circuits. Furthermore, for Third Parties who are Foundry Companies, such sublicense shall include the right for such Third Parties to manufacture Semiconductor Products only for sale to AMD until *** after Qualification of the applicable Process Development Project and thereafter to others; (c) such...

  • Page 202
    ...-tangible information related to said information which is retained in the minds of the Party's employees will be treated as Specific Results. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 34 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 203
    ... license, to use such Background Know-How for the purpose of researching, developing, engineering, manufacturing, using, marketing, selling, servicing and otherwise disposing of Licensed Products. AMD shall have no obligation under this Agreement to pay any royalty for the licenses set forth in this...

  • Page 204
    ...Background Know-How for the purpose of researching, developing, engineering, manufacturing, using, marketing, selling, servicing and otherwise disposing of Integrated Circuits, and to make derivatives of such information for such uses. In the case of copyrights, such license is to copy documentation...

  • Page 205
    EXECUTION VERSION 8.7 After September 30, 2003, AMD may exercise the sublicensing option in this Section 8.7. IBM hereby grants to AMD the right to disclose and sublicense the process technology developed by IBM and AMD under this Agreement including SOI Device Information, High Performance Device ...

  • Page 206
    ... grants to AMD a license to the process technology developed by IBM and AMD under this Agreement including Pre-T0 Information (including High Sensitivity Pre-T0 Information), SOI Device Information, High Performance Device Information, Industry Standard CMOS Information and Bulk CMOS Information...

  • Page 207
    ...trade secrets and know-how, owned or licensable by IBM, contained in the IBM Background Know-How, Specific Results and Pre-T0 Information (excluding High Sensitivity Pre-T0 Information) to make Licensed Products, in a 90, a 65 and 45 nanometer semiconductor manufacturing process for sale only to AMD...

  • Page 208
    ... AMD shall be permitted to perform bumping using the Bump Technology for up to *** semiconductor wafers per ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 40 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 209
    ...including use in the development, manufacture, marketing, and maintenance of any products and services. The term "residuals" means that information in non-tangible form which may be mentally retained by those Representatives of a Party who have had access to Specific Results, the Background Know-How...

  • Page 210
    EXECUTION VERSION 9.2 Each Party grants to the other Party under the Proprietary Tools provided by that Party for use in the Process Development Projects, an irrevocable, non-exclusive and royalty-free license to use, execute, display, and perform such Proprietary Tools in the Development Facilities...

  • Page 211
    ..." such product apparatus and/or material, or "have practiced" any such method or process, unless such right is expressly recited therein. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 43 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 212
    ... the Exchange Act) of securities of the company representing: (i) more than one third of voting securities ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 44 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 213
    EXECUTION VERSION having the voting power of such Party's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated ...

  • Page 214
    ... of the date of this Agreement of the account and other details needed by the other Party in order to ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 46 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 215
    ... Box 3453, MS150 Sunnyvale, CA 94088 Tel: (408)*** Fax: (408)*** Attention: General Counsel ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 47 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 216
    ... for incidental damages, punitive damages, lost profits, lost savings or any other such damages, including consequential Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 48 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 217
    ...use in advertising, publicity or other promotional activities any name, trade name, trademark or other designation of either Party hereto (including any contraction... of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 49 of 90 Source: ADVANCED MICRO DEVIC, 10-K, ...

  • Page 218
    ... that shall include the entire business and assets responsible for such Party's performance of its obligations under this Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 50 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 219
    ... Party to design, develop, manufacture, sell, market, service, or otherwise deal in, directly or indirectly, manufacturing processes, products or services developed by such Party completely independent of this Agreement, including those which are competitive with those offered by any Party. Subject...

  • Page 220
    ...Party thereafter to enforce each and every provision of any of this Agreement. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 52 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 221
    ...executed by their duly authorized representatives as of the Effective Date. Advanced Micro Devices, Inc. By: Name: Title: /s/ Hector Ruiz Hector Ruiz CEO International Business Machines Corporation By: Name: Title: /s/ Adalio Sanchez Adalio Sanchez General Manager, Technology Collaboration Solutions...

  • Page 222
    ... EXHIBIT J: DOCUMENTATION EXHIBIT K: BULK CMOS AND INDUSTRY STANDARD CMOS LIST EXHIBIT L: HIGH SENSITIVITY PRE-T0 INFORMATION Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 54 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 223
    ... Options The CMOS-10S technology may include the following features if needed and technically feasible: - *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 55 of 90 Source: ADVANCED MICRO...

  • Page 224
    ...Options The CMOS-10SE technology may include the following features if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 56 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 225
    ... Options The CMOS-11S technology may include the following features if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 57 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 226
    ... Options The CMOS-11S2 technology may include the following features, if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 58 of 90 Source: ADVANCED MICRO...

  • Page 227
    ... Options The CMOS-12S technology may include the following features if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 59 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 228
    ...Options The CMOS-12S2 technology may include the following features if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 60 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 229
    ...TECHNICAL OBJECTIVES Strategic Technology Objectives *** Technology Implementation Options *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 61 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 230
    ...TECHNICAL OBJECTIVES Strategic Technology Objectives *** Technology Implementation Options *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 62 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 231
    ...TECHNICAL OBJECTIVES Strategic Technology Objectives *** Technology Implementation Options *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 63 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 232
    EXECUTION VERSION EXHIBIT A A.10 Pre-T0 In-scope Technical Subjects Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 64 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 233
    EXECUTION VERSION EXHIBIT A A.10 Pre-T0 In-scope Technical Subjects Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 65 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 234
    EXECUTION VERSION EXHIBIT A A.10 Pre-T0 In-scope Technical Subjects *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 66 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 235
    ... Options The technology may include the following features if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 67 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 236
    ... Options The technology may include the following features if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 68 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 237
    ... Options The technology may include the following features if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 69 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 238
    ...TECHNICAL OBJECTIVES Strategic Technology Objectives *** Technology Implementation Options *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 70 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 239
    ...The CMOS 12SeD technology may include the following features, if needed and technically feasible: *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 71 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 240
    ... to be determined Technology Implementation Options Technology Implementation Options to be determined ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 72 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 241
    ... process Test Site T2: meets functional requirements for an SOI Integrated Circuit product (not Test Site) ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 73 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 242
    EXECUTION VERSION Preliminary Schedule for work supporting 12SeD Key CMOS 12SeD Design Milestones Milestone Comment *** D0.0 D0.3 D1.0 D1.3... Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 74 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March ...

  • Page 243
    EXECUTION VERSION EXHIBIT C MINIMUM STAFFING PARTICIPATION (Average Annual Staffing Level) 2003 2004 2005 2006 2007 2008 2009 2010 2011 CMOS + eDRAM Bump * ** ***... of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 75 of 90 Source: ADVANCED MICRO DEVIC, 10-K, ...

  • Page 244
    ... to be achieved under the Agreement, shall reside with the IBM Project Leader with the help of the AMD Project Leader. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 76 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 245
    ... planning Responsible for management of IBM Personnel Responsible for completion of Documentation for each Process Development Projects - Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 77 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 246
    ... for management of respective Party's personnel Responsible for completion of Documentation for each Process Development Projects Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 78 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 247
    ... and ammunition, cameras, and recording devices are not permitted on IBM premises. 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 79 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 248
    ... under the Agreement, shall reside with the IBM Pre-T0 Project Leader with the help of the AMD Pre-T0 Project Leader. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 80 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 249
    ... schedule planning Responsible for management of IBM Pre-T0 personnel Responsible for completion of appropriate Pre-T0 documentation - - Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 81 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 250
    ... publications Responsible for management of respective Party's personnel Responsible for completion of appropriate Pre-T0 documentation - Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 82 of 90 Source: ADVANCED MICRO DEVIC...

  • Page 251
    ... personnel Responsible for completion of any appropriate Bump Technology Process Development Projects documentation - Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 83 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 252
    ... personnel Responsible for completion of any applicable Bump Technology Process Development Projects documentation Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 84 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 253
    ... or High Performance Integrated Circuit device model - Parameter extraction - AC Performance Verification - Tolerance data - Compact model Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 85 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 254
    EXECUTION VERSION - Device-level library - HSpice convergence - Body contact modeling - SOI Resistor and capacitor - ESD circuitry at I/O pads Technology Qualification Vehicle Documentation Technology Design Manual Test Site description - Groundrule waivers Kerf description document In-Line ...

  • Page 255
    ...Catalog Bill Of Materials For bumps Technology Qualification Vehicle Documentation Technology Design Manual, if available Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 87 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 256
    ...transferring such information to its own manufacturing facilities. All such documentation shall be made available to all three (3) Parties. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 88 of 90 Source: ADVANCED MICRO DEVIC, 10...

  • Page 257
    EXECUTION VERSION EXHIBIT K BULK CMOS AND INDUSTRY STANDARD CMOS LIST � *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 89 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 258
    EXECUTION VERSION EXHIBIT L HIGH SENSITIVITY PRE-T0 INFORMATION *** ***Confidential Treatment Requested. Third Amendment and Restatement of "S" Process Development Agreement between AMD and IBM IBM - AMD Confidential Page 90 of 90 Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 259
    ...Advanced Micro Devices S.p.A. AMD Japan Ltd. Advanced Micro Devices Sdn. Bhd. (7) Advanced Micro Devices Export Sdn. Bhd. (8) AMD (Netherlands) B.V. Advanced Micro Devices (Singapore) Pte. Ltd. Advanced Micro Devices, AB Advanced Micro Devices (U.K.) Limited ATI Technologies U.L.C. ATI International...

  • Page 260
    ... AMD Saxony LLC is the general partner and AMD Saxony Holding GmbH and AMD Saxony Admin GmbH are the limited partners Subsidiary of AMD Saxony Holding GmbH Subsidiary of Advanced Micro Devices Sdn. Bhd. Subsidiary of Advanced Micro Devices Export Sdn. Bhd. Subsidiary of Advanced Micro Devices (China...

  • Page 261
    ... ATI Technologies Inc. Share Option Plan, as amended, ARTX, Inc. 1997 Equity Incentive Plan, as amended; • Registration Statement on Form S-8 (No. 333-134853) pertaining to the Advanced Micro Devices, Inc. 2004 Equity Incentive Plan and the Advanced Micro Devices, Inc. 2000 Employee Stock Purchase...

  • Page 262
    ... ATI Technologies Inc. Share Option Plan, as amended, ARTX, Inc. 1997 Equity Incentive Plan, as amended; • Registration Statement on Form S-8 (No. 333-134853) pertaining to the Advanced Micro Devices, Inc. 2004 Equity Incentive Plan and the Advanced Micro Devices, Inc. 2000 Employee Stock Purchase...

  • Page 263
    ... Rivet, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign Advanced Micro Devices, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31...

  • Page 264
    ...not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: February 28, 2007 /s/ HECTOR DE J. RUIZ Hector de J. Ruiz Chairman and Chief Executive Officer Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 265
    ... material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: February 28, 2007 /s/ ROBERT J. RIVET Robert J. Rivet Executive Vice President, Chief Financial Officer Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 266
    ...(ii.) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 28, 2007 /s/ HECTOR DE J. RUIZ Hector de J. Ruiz Chairman and Chief Executive Officer Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 267
    ... (ii.) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 28, 2007 /s/ ROBERT J. RIVET Robert J. Rivet Executive Vice President, Chief Financial Officer Source: ADVANCED MICRO DEVIC, 10...

  • Page 268
    ... year ended December 31, 2006 included stock-based compensation expense of $17.4 million, which consisted of $17.3 million related to the Company's stock options and restricted stock units, and $0.1 million related to AMD stock options granted to the Company's employees. Net loss for the year ended...

  • Page 269
    ... $2,088 and $2,214 for related parties) Trade accounts receivable, net Other receivables from related parties Inventories: Raw materials Work-in-process Finished goods Total inventories Deferred income taxes Prepaid expenses and other current assets Total current assets Property, plant and equipment...

  • Page 270
    ...) Class D convertible common stock, $0.001 par value per share, 35,000,000 shares authorized; 0 and 32,352,934 shares issued and outstanding as of December 31, 2006 and December 25, 2005 (Note 16) Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss Total stockholders...

  • Page 271
    ...disposal of property, plant, and equipment Gain on sale of marketable securities Compensation recognized under employee stock plans Changes in operating assets and liabilities: Decrease (increase) in trade accounts receivable from related parties/members Decrease (increase) in other receivables from...

  • Page 272
    ... Proceeds from borrowings, net of issuance costs Payments on loans from related parties/members Payments on debt and capital lease obligations Proceeds from issuance of common stock, net of offering costs Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and...

  • Page 273
    ... related party, net Discharge of stock-based compensation payable to AMD (Note 4) Issuance of shares: Vesting of RSUs Issuance of common stock in secondary offering, net of issuance costs of $2,133 Compensation recognized under employee stock plans Balance at December 31, 2006 Total Stockholders...

  • Page 274
    ...result, Spansion LLC began manufacturing finished Flash memory devices which through the first fiscal quarter of fiscal 2006 were exclusively sold to AMD and Fujitsu. In the second quarter of fiscal 2006, the Company began selling its products directly to customers previously served by AMD (See Note...

  • Page 275
    ... of purchase. Investments The Company's investments in marketable securities consist of money market funds, commercial paper, auction rate securities and publicly traded equity securities. These securities are designated as available-for-sale and are reported at fair market value with the related...

  • Page 276
    ... quarter of fiscal 2006, AMD sold the Company's products to its distributors under terms allowing these distributors certain rights of return, stock rotation and price protection privileges on unsold merchandise held by them. The Company extended the same rights on these Flash memory product sales...

  • Page 277
    ... time the assets cease to be used. Impairment losses were not material in any of the periods presented. Product Warranties The Company offers a one-year limited warranty for Spansion Flash memory devices (See Note 8). At the time revenue is recognized, the Company provides for estimated costs that...

  • Page 278
    ..., the Company has approximately 134.2 million shares of Class A common stock, 1 share of Class B common stock, and 1 share of Class C common stock as of December 31, 2006. In connection with this offering, all the Class D common stock converted to Class A common stock. Source: ADVANCED MICRO DEVIC...

  • Page 279
    ... and related interpretations, consistent with the accounting method followed by AMD for stock options and RSU awards issued to employees of the consolidated AMD group. The exercise price of these stock options was equal to the market price of AMD's common stock on the date of grant. The Company...

  • Page 280
    ... valuations require assumptions and methods which must be used to develop the best estimate of the benefit costs. These valuation assumptions include salary growth, long-term return on plan assets, discount rates and other factors. The salary growth assumptions reflect the Company's future and...

  • Page 281
    ... 14. 4. Stock-Based Compensation AMD Stock Options Through December 25, 2005, AMD granted stock options to the Company's employees with an aggregate grant-date value of approximately $19.4 million. The Company paid AMD approximately $8.5 million and $0.9 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 282
    ... options granted under the 2005 Equity Incentive Plan may only be granted to employees of the Company or its subsidiaries. The exercise price of each incentive stock option is required to be not less than 100 percent of the fair market value of the Company's Class A common stock on the date of grant...

  • Page 283
    ... share exchange, merger, consolidation, or a sale or other dispositions of all or substantially all of the Company's assets. Shares Available to Grant Number of awards available for grant under the 2005 Equity Incentive Plan: Amounts reserved for grant Stock options granted through December 31, 2006...

  • Page 284
    ... $6.87 per share, respectively. The Company did not provide stock-based compensation to its employees or third parties prior to the IPO on December 15, 2005. The fair value of each stock option was estimated at the date of grant using a Black-Scholes-Merton option pricing model, with the following...

  • Page 285
    ... of Class A common stock on the first business date of an offering period, or (2) the fair market value per share of Class A common stock on the last business date of that offering period. The Company has reserved 2,250,000 shares of Class A common stock available for Source: ADVANCED MICRO DEVIC...

  • Page 286
    ... issue shares under this plan in the future. The 2005 Employee Stock Purchase Plan, if implemented, will be administered by the Compensation Committee. 5. Related Party Transactions Prior to the second quarter of fiscal 2006, the Company relied on AMD and Fujitsu as sole distributors of its products...

  • Page 287
    ...provides test and assembly services to the Company on a contract basis. Also, the Company purchases commercial die from Fujitsu, which are packaged together with the Company's Flash memory devices. Fujitsu seconded certain employees to the Company until the second quarter of fiscal 2006. The Company...

  • Page 288
    ... Financial Statements-(Continued) Facilities, and certain assets located in the JV1/JV2 Facilities, to Fujitsu for a purchase price of approximately $150 million plus the value of the inventory at the time of closing. Concurrently with the execution of the asset purchase agreement, Spansion Japan...

  • Page 289
    ...had recorded an unrealized gain of approximately $7.3 million in other comprehensive loss on its investment in certain publicly-traded equity securities. In fiscal 2006 the Company sold this investment in its entirety and realized a gain on the sale of $6.9 million. Source: ADVANCED MICRO DEVIC, 10...

  • Page 290
    ..., the fair values of the Company's foreign currency forward contracts were not significant. 8. Warranties and Indemnities The Company offers a one-year limited warranty for its Flash memory products. Changes in the Company's liability for product warranty during the years ended December 31, 2006 and...

  • Page 291
    ... Limited, to AMD and its subsidiary in Singapore, Advanced Micro Devices (Singapore) Pte., or AMD Singapore. On February 15, 2006, the Company repaid the remaining outstanding principal of $15.0 million and accrued interest of approximately $121,000 to AMD under the Spansion China Line of Credit...

  • Page 292
    ... the sale of certain assets by AMD Export to Spansion Penang. On June 28, 2006, the Company repaid AMD the remaining outstanding principal of approximately 19.3 million Malaysian Ringgit (approximately $5.4 million based on the exchange rate as of June 28, 2006) under the Spansion Penang Building...

  • Page 293
    ... 31, 2006), which may remain outstanding for up to three months. Amounts borrowed under the credit facility bear interest at a rate equal to the Tokyo Interbank Offered Rate, or TIBOR, at the time of the drawdown, plus a margin of 0.5 percent per annum. Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 294
    ... enter into any merger, company partition, exchange or transfer of shares, assign all or a part of its business or assets to a third party, or otherwise transfer all or a material part of its assets to a third party, subject to certain exceptions. Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 295
    ... at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the previous fiscal quarter, is greater than or equal to 120 percent of the conversion price per share of the Spansion Inc. Class A common stock; Source: ADVANCED MICRO DEVIC, 10-K, March 01...

  • Page 296
    ... percent of the product of the sale price of the Spansion Inc. Class A common stock and the number of shares issuable upon exchange of $1,000 principal amount of the debentures; or • Upon the occurrence of specified corporate events that constitute a fundamental change of the Company under certain...

  • Page 297
    ... Notes indenture, Spansion LLC's 2.25% Exchangeable Senior Subordinated Debentures indenture, the senior secured revolving credit facility, capital leases not to exceed 15 percent of Spansion Inc.'s total assets, indebtedness of acquired subsidiaries existing at the time of such acquisition and...

  • Page 298
    ... credit facility. Obligations under Capital Leases On September 29, 2006, the Company entered into a sale-leaseback transaction with a third-party financial institution for certain equipment in the amount of $29.1 million of cash proceeds. Upon execution of the agreements, the equipment had a net...

  • Page 299
    ... of the Company: Liabilities Guaranteed by AMD As of As of Dec. 31, 2006 Dec. 25, 2005 (in thousands) Spansion capital lease guarantees Spansion operating lease guarantees Total debt guaranteed by AMD $ $ 2,708 3,977 6,685 $ $ 35,851 7,071 42,922 Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 300
    ... to the Company as of September 1, 2003. Royalty related to the sale of products containing this license was not significant in fiscal 2006 and fiscal 2005. The Company did not meet the minimum requirements to trigger royalty payments in fiscal 2004. Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 301
    ...,013) Pre-tax profit from foreign operations was $10 million for the year ended December 31, 2006. Pre-tax losses from foreign operations were $41 million for the year ended December 25, 2005 and $0.7 million for the year ended December 26, 2004. Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 302
    .... 31, 2006 Dec. 25, 2005 Deferred tax assets: Net operating loss carryovers Deferred distributor income Inventory valuation Accrued expenses not currently deductible Pension benefits Property, plant and equipment Federal and state tax credit carryovers Stock-based compensation Other Total deferred...

  • Page 303
    ... the utilization of deferred tax assets that are currently subject to a valuation allowance. During fiscal year 2006, the Company resolved audits in Japan and Thailand that resulted in the reversal of the tax reserves of approximately $6.4 million. Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 304
    ... required to fund those proportional benefit obligations attributable to the Company's employees enrolled in these plans. Until September 1, 2005, the Company accounted for its participation in these plans as multiemployer plans wherein the expense recorded for the plans was equal to its annual cash...

  • Page 305
    ... currency exchange rate changes Fair value of plan assets at December 31, 2006 Dec. 31, Dec. 25, 2006 2005 (in thousands) $ $ 63,705 4,566 11,448 (628) (1,827) 77,264 $ $ 48,736 3,247 14,468 (526) (2,220) 63,705 Funded status Unrecognized net actuarial loss Unrecognized prior service cost...

  • Page 306
    ...2006 Service cost Interest cost Expected return on plan assets Amortization of prior service cost Total net periodic pension expense 5,123 1,517 (2,818) 741 $ 4,563 $ $ $ 1,612 376 (488) 243 1,743 Prior to September 1, 2005, the plan was not accounted for under single employer plan accounting...

  • Page 307
    ... 31, 2006 Dec. 25, 2005 Asset Category Equity Securities Debt Securities Cash Total 42% 55% 3% 100% 46% 51% 3% 100% No plan assets are invested in employer securities and no future benefits are currently covered by insurance contracts issued by the insurer or related parties. The Company expects...

  • Page 308
    ... and tracks its results in one reportable segment. The Company primarily designs, develops, manufactures, markets and sells Flash memory products for the wireless and embedded applications in the integrated category of the Flash memory market. Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007

  • Page 309
    ... quarter of fiscal 2006, the Company began to sell directly to AMD's former customers and customers not served solely by Fujitsu (end customers). Among those customers, Nokia Corporation accounted for approximately 12 percent of the Company's net sales in fiscal 2006. Long-lived assets information...

  • Page 310
    ... in the Company falls below ten percent of the outstanding shares of the Company's capital stock, as calculated on an as-converted to common stock basis; or • AMD transfers its share of Class B common stock to any person other than an AMD affiliate. Source: ADVANCED MICRO DEVIC, 10-K, March...

  • Page 311
    ... of the outstanding shares of the Company's capital stock, as calculated on an as-converted to common stock basis; or • Fujitsu transfers its share of Class C common stock to any person other than a Fujitsu affiliate. In the event of any such conversion, any rights specifically granted to the...

  • Page 312
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the...