AMD 2008 Annual Report Download - page 122

NOTE 4: Investment in Spansion, Inc.
On December 21, 2005, the Company’s majority owned subsidiary, Spansion Inc., completed its Initial
Public Offering (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. As a
result, immediately after the IPO, the Company owned a total of 48,529,403 shares, or approximately 38 percent,
of Spansion’s outstanding common stock. The Company did not receive any proceeds from Spansion’s IPO.
Dilution in Ownership Interest
Following the IPO, the Company’s ownership interest was diluted from 60 percent to approximately 38
percent, and the Company no longer exercised voting control, but did retain the ability to exercise significant
influence over Spansion’s operations. Therefore, starting from December 21, 2005, the Company used the equity
method of accounting to reflect its investment in Spansion.
In 2006, the Company sold 21 million shares of its Spansion Class A common and realized a gain of $6
million from the sale. During 2007, the Company sold 13,491,493 shares of Spansion Class A common stock.
The Company received $157 million in net proceeds from the sales and realized a gain of $1.4 million. The
Company continued to use the equity method of accounting to account for its investment because, for accounting
purposes, the Company was deemed to continue to have the ability to exercise significant influence over
Spansion.
On September 20, 2007, Dr. Ruiz, the Company’s Executive Chairman, resigned as Chairman of the Board
of Directors of Spansion. The Company also transferred its one share of Class B common stock to Spansion and,
accordingly, relinquished the right to appoint a director to Spansion’s Board of Directors. Therefore, the
Company changed its accounting for this investment from the equity method to accounting for this investment as
“available-for-sale” marketable securities. From this point, Spansion was no longer considered to be a related
party of the Company. After considering Spansion’s operating results, its stock price trends and the Company’s
intention to liquidate its investment, the Company concluded that this investment was other than temporarily
impaired as of September 29, 2007 and again as of December 29, 2007. Therefore, the Company recorded other
than temporary impairment charges of $111 million in 2007, reflecting the write-down of this investment to its
fair value of $56 million. These impairment charges are included in the caption “Equity in net loss of Spansion
Inc. and other” on the Company’s 2007 consolidated statement of operations.
During 2008, the Company recorded other than temporary impairment charges of $53 million after
considering Spansion’s operating results and its stock price trends. As of December 27, 2008, the Company
owned a total of 14,037,910 shares, or approximately 8.7 percent of Spansion’s outstanding common stock with a
carrying value of $3 million included in the caption “Marketable securities” on the Company’s consolidated
balance sheet.
Related-Party Transactions
On December 21, 2005, Spansion became an unconsolidated equity investee of the Company. The following
table represents the significant account balances receivable from or payable to Spansion at December 31, 2006:
As of
December 31,
2006
(In millions)
Receivable from Spansion (short-term) ............................... $10
Receivable from Spansion (long-term) ............................... 5
Accounts payable to Spansion ...................................... 2
112