AMD 2007 Annual Report Download - page 36

Table of Contents
conversion of the 6.00% Notes could still have a dilutive effect on our earnings per share to the extent that the price of our common stock exceeds $42.12, which
is the cap price of the capped call. Similarly, the conversion of the 5.75% Notes could have a dilutive effect on our earnings per share to the extent that the price
of our common stock exceeds $20.13, the conversion price of the 5.75% Notes. Any sales in the public market of our common stock issuable upon such
conversion could adversely affect prevailing market prices of our common stock. In addition, the anticipated conversion of the 5.75% Notes or 6.00% Notes into
cash and shares of our common stock could depress the price of our common stock.
The capped call transaction may affect the value of our common stock.
We entered into a capped call transaction in connection with the issuance of the 6.00% Notes. The capped call transaction is expected to reduce the
potential dilution upon conversion of the 6.00% Notes in the event that the market value per share of our common stock at the time of exercise, as measured
under the terms of the capped call transaction, is greater than the strike price of the capped call transaction, which corresponds to the initial conversion price of
the 6.00% Notes and is subject to certain adjustments similar to those contained in the 6.00% Notes. If, however, the market value per share of our common stock
exceeds the cap price of the capped call transaction, as measured under the terms of the capped call transaction, the dilution mitigation under the capped call
transaction will be limited, which means that there would be dilution to the extent that the then market value per share of our common stock exceeds the cap price
of the capped call transaction. In connection with hedging the capped call transaction, the counterparty or its affiliates: may enter into or unwind various
derivatives and/or purchase or sell our common stock in secondary market transactions (and are likely to do so during any observation period related to the
conversion of the 6.00% Notes). These activities could have the effect of decreasing the price of our common stock during any observation period related to a
conversion of the 6.00% Notes. The counterparty or its affiliates are likely to modify their hedge positions in relation to the capped call transaction from time to
time prior to conversion or maturity of the 6.00% Notes by purchasing and selling our common stock, other of our securities, or other instruments they may wish
to use in connection with such hedging. In particular, such hedging modifications are likely to occur during any observation period related to a conversion of the
6.00% Notes, which may have a negative effect on the value of the consideration received upon conversion of the 6.00% Notes. In addition, we intend to exercise
options we hold under the capped call transaction whenever the 6.00% Notes are converted. In order to unwind its hedge positions with respect to those exercised
options, the counterparty or affiliates thereof expect to sell our common stock in secondary market transactions or unwind various derivative transactions with
respect to our common stock during the observation period, if any, for the converted 6.00% Notes. If we elect to cash-settle the capped call transaction, which we
are permitted to do subject to certain conditions, it is likely the counterparty or its affiliates will sell an even greater number of shares. The effect, if any, of these
transactions and activities on the market price of our common stock or the 6.00% Notes will depend in part on market conditions and cannot be ascertained at this
time, but any of these activities could adversely affect the value of our common stock and the value of the 6.00% Notes.
If we lose Microsoft Corporation’s support for our products, our ability to sell our products could be materially adversely affected.
Our ability to innovate beyond the x86 instruction set controlled by Intel depends partially on Microsoft designing and developing its operating systems to
run on or support our microprocessor products. If Microsoft does not continue to design and develop its operating systems so that they work with our x86
instruction sets, independent software providers may forego designing their software applications to take advantage of our innovations and customers may not
purchase PCs with our microprocessors. In addition, software drivers sold with our products are certified by Microsoft. If Microsoft did not certify a driver, or if
we otherwise fail to retain the support of Microsoft, our ability to market our products would be materially adversely affected.
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008