AMD 2007 Annual Report Download - page 111

Table of Contents
The Company’s cost basis in goodwill deductible for tax was $2.6 billion. The Company’s adjusted tax basis after tax deductions in 2006 and 2007 is $2.3
billion.
The outcome of the Company’s goodwill impairment analysis indicated that the carrying amount of certain acquisition related intangible assets or asset
groups may not be recoverable. The Company assessed the recoverability of the acquisition related intangible assets or asset groups, as appropriate, by
determining whether the unamortized balances could be recovered through undiscounted future net cash flows. The Company determined that certain of the
acquisition related developed product technology associated with its Graphics and Consumer Electronics segments was impaired primarily due to the revised
lower revenue forecasts associated with the products incorporating such developed product technology. The Company measured the amount of impairment by
calculating the amount by which the carrying value of the assets exceeded their estimated fair values, which were based on projected discounted future net cash
flows. As a result of this impairment analysis, the Company recorded an impairment charge of $349 million, which is included in the caption “Impairment of
goodwill and acquired intangible assets” in its 2007 consolidated statement of operations. The Company also revised its estimate of the weighted average useful
life of the developed product technology from 60 months to 50 months based on the revised cash flow forecasts.
The balances of acquisition related intangible assets as of December 29, 2007, were as follows:
December 29, 2007
Weighted
Average
Amortization
Period (in
months)
Cost of
ATI
Acquisition
Related
Intangible
Assets
Amortization
Expense in
2006
Amortization
Expense in
2007
Impairment
Losses Net
(In millions)
Developed product technology 50 $ 752 $ (25) $ (138) $ (349) $ 240
Game console royalty agreements 60 147 (5) (29) — 113
Customer relationships 48 257 (11) (64) — 182
Trademark and trade name 84 62 (1) (9) — 52
Customer backlog 14 36 (5) (31) — —
Total $ 1,254 $ (47) $ (271) $ (349) $ 587
Estimated future amortization expense related to acquisition related intangible assets is as follows:
In millions
Fiscal Year
2008 $ 202
2009 161
2010 146
2011 61
2012 9
Thereafter 8
Total $ 587
NOTE 4: Investment in Spansion Inc.
On December 21, 2005, the Company’s majority owned subsidiary, Spansion Inc., completed its IPO of 47,264,000 shares of its Class A common stock as
well as offerings of senior notes to the Company and institutional investors with an aggregate principal amount of approximately $425 million. In addition, the
Company cancelled $60 million of the aggregate principal amount outstanding under Spansion LLC’s promissory note issued to the Company on June 30, 2003
in exchange for 5,000,000 shares of Spansion’s Class A common
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008