AMD 2008 Annual Report Download - page 61

3D graphics and digital media silicon solutions. We believe that the Acquisition allows us to deliver products that
better fulfill the increasing demand for more integrated computing solutions. We included the operations of ATI
in our consolidated financial statements beginning on October 25, 2006.
The aggregate consideration we paid for all outstanding ATI common shares consisted of approximately
$4.3 billion of cash and 58 million shares of our common stock. In addition, we also issued options to purchase
approximately 17.1 million shares of our 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, we borrowed $2.5
billion pursuant to a Credit Agreement with Morgan Stanley Senior Funding Inc. dated October 24, 2006
(October 2006 Term Loan). We 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 value of the projects for
the Graphics segment and Chipsets business unit was approximately $193 million ($122 million for graphics
products and $71 million for chipset products). The estimated fair value of the projects for the former Consumer
51