AMD 2008 Annual Report Download - page 115

3D graphics and digital media silicon solutions. The Company believes that the Acquisition allows it to deliver
products that better fulfill the increasing demand for more integrated computing solutions. The Company
included the operations of ATI in its consolidated financial statements beginning on October 25, 2006.
The aggregate consideration paid by the Company for all outstanding ATI common shares consisted of
approximately $4.3 billion of cash and 58 million shares of the Company’s common stock. In addition, the
Company also issued options to purchase approximately 17.1 million shares of the Company’s common stock
and approximately 2.2 million comparable AMD restricted stock units in exchange for outstanding ATI stock
options and restricted stock units. The vested portion of these options and restricted stock units was valued at
approximately $144 million. The unvested portion, valued at approximately $69 million, continues to be
amortized as compensation expense over the remaining vesting periods of the assumed options. To finance a
portion of the cash consideration paid, the Company borrowed $2.5 billion pursuant to a Credit Agreement with
Morgan Stanley Senior Funding Inc. dated October 24, 2006 (October 2006 Term Loan). The Company repaid
the October 2006 Term Loan in 2007. The total purchase price for ATI was $5.6 billion including acquisition-
related costs of $25 million.
Purchase Price Allocation
The total purchase price was allocated to ATI’s tangible and identifiable intangible assets and liabilities
based on their estimated fair values as of October 24, 2006 as set forth below:
(In millions)
Cash and marketable securities ...................................... $ 500
Accounts receivable ............................................... 290
Inventories ...................................................... 431
Goodwill ........................................................ 3,217
Developed product technology ....................................... 752
Game console royalty agreement ..................................... 147
Customer relationships ............................................. 257
Trademarks and trade names ........................................ 62
Customer backlog ................................................. 36
In-process research and development .................................. 416
Property, plant and equipment ....................................... 143
Other assets ...................................................... 25
Accounts payable and other liabilities ................................. (631)
Reserves for exit costs ............................................. (8)
Debt and capital lease obligations .................................... (31)
Deferred revenues ................................................. (2)
Total purchase price ............................................... $5,604
Management performed an analysis to determine the fair value of each tangible and identifiable intangible
asset, including the portion of the purchase price attributable to acquired in-process research and development
projects.
In-Process Research and Development
Of the total purchase price, approximately $416 million was allocated to in-process research and
development (IPR&D) and was expensed in the fourth quarter of 2006. Projects that qualified as IPR&D
represented those that had not reached technological feasibility and had no alternative future use at the time of
the acquisition. These projects included development of next generation products for the Graphics segment and
Chipsets business unit and the former Consumer Electronics segment. The estimated fair values of the projects
for the Graphics segment and Chipsets business unit was approximately $193 million ($122 million for
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