AMD 2006 Annual Report Download - page 145

Table of Contents
Warranties and Indemnities
The Company generally warrants that microprocessor products sold to its customers will, at the time of shipment, be free from defects in workmanship and
materials and conform to its approved specifications. Subject to certain exceptions, the Company generally offers a three-year limited warranty to end users for
microprocessor products that are commonly referred to as “processors in a box,” a one-year limited warranty to direct purchasers of all other microprocessor
products that are commonly referred to as “tray” microprocessor products, and a one-year limited warranty to direct purchasers of embedded processor 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 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 an end user but not later than 90 days after shipment
of such products to its customers. The Company generally warrants that ATI-branded PC workstation products will be free from defects in material and
workmanship under normal use and service for a period of three years, beginning on the date first sold to an end user but not later than 90 days after shipment of
such products to its customers.
Changes in the Company’s potential liability for product warranty during the years ended December 31, 2006 and December 25, 2005 are as follows:
Year Ended
December 31,
2006
December 25,
2005
(In millions)
Balance, beginning of year $ 19 $ 22
Fair value of warranty liability acquired from ATI 1 —
New warranties issued during the year 47 39
Settlements during the year (34) (28)
Changes in liability for pre-existing warranties during the year,
including expirations (7) (13)
Decrease due to deconsolidation of Spansion on December 21, 2005 — (1)
Balance, end of year $ 26 $ 19
In addition to product warranties, the Company, from time to time in its normal course of business, indemnifies other parties with whom it enters into
contractual relationships, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. The Company has
agreed to hold the other party harmless against specified losses, such as those arising from a breach of representations or covenants, third-party claims that the
Company’s products when used for their intended purpose(s) infringe the intellectual property rights of a third party or other claims made against certain parties.
It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the limited history of indemnification
claims and the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made
by the Company under these obligations have not been material.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007