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2010 ANNUAL REPORT ON FORM 10-K

Table of contents

  • Page 1
    2010 ANNUAL REPORT ON FORM 10-K

  • Page 2

  • Page 3
    ... graphics processor units (GPUs) in 2010, and are currently shipping a second generation of cutting-edge products based on this important technology. Our DirectX® 11 leadership helped generate record annual GPU shipments and revenue. We also posted an all-time company high for annual GPU unit...

  • Page 4
    .... We plan to launch our A-Series APU, formerly codenamed "Llano," for the mainstream notebook and desktop segments in the second quarter of 2011 followed by our brand new core, "Bulldozer," bringing a new level of performance-per-watt capability across enthusiast-class clients and servers in the...

  • Page 5
    ...THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 25, 2010 OR ' TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number 001-07882 ADVANCED MICRO DEVICES, INC. (Exact name of registrant...

  • Page 6

  • Page 7
    ...MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ...SELECTED FINANCIAL DATA ...MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...

  • Page 8

  • Page 9
    ..., without limitation, the following: the expected rate of market growth and demand for our products and technologies (and the mix thereof); our expected market share; our expected product costs and average selling price; our overall competitive position and the competitiveness of our current and...

  • Page 10
    ... x86 microprocessors, for the commercial and consumer markets, embedded microprocessors for commercial, commercial client and consumer markets and chipsets for desktop and notebook PCs, professional workstations and servers; and (ii) graphics, video and multimedia products for desktop and notebook...

  • Page 11
    ... companies have continually developed improvements in manufacturing and process technology and design. ICs are increasingly being manufactured using smaller geometries on larger silicon wafers. Use of smaller process geometries can result in products that are higher performing, use less power...

  • Page 12
    ... feature our new x86 CPU core, codenamed "Bobcat," which is designed specifically for the low-powered and ultra-thin PC markets. Server. Our microprocessors for server platforms consist primarily of multi-core AMD Opteron processors. A server is a system that performs services for connected clients...

  • Page 13
    ...memory controller and integrated HyperTransport links, so that performance scales well with the number of cores. We designed the AMD Athlon processors for advanced multitasking on mainstream desktop PCs, and they are currently available with single or dual-core technology. We designed the AMD Athlon...

  • Page 14
    ... AMD Fusion technology, the new G-Series delivers a full-featured embedded platform and is designed to help reduce power consumption, physical footprint of the components and the costs to design and produce highly-integrated embedded solutions. Chipset Market and Products Chipsets send data between...

  • Page 15
    ... graphics solution can be in the form of either a discrete GPU, an integrated chipset, or an embedded graphics processor solution. The semiconductor graphics market addresses the need for visual or parallel processing in various computing and entertainment platforms such as desktop PCs, notebook PCs...

  • Page 16
    ... 3D graphics cards with a flex cable connection that can enhance performance of geometry-limited applications. FireStream Processors. We designed our AMD FireStreamâ„¢ series of products to utilize the parallel stream processing power of the GPU for heavy floating-point computations and to meet...

  • Page 17
    ...marketed using the "Neo" model designator for low power products targeted at the thin-and-light notebook segment. Our server brand for microprocessors is AMD Opteron. We also sell low-power versions of our AMD Opteron, AMD Athlon, AMD Turion and AMD Sempron processors as embedded processor solutions...

  • Page 18
    ... as desktop and server motherboard manufacturers who incorporate chipsets into their channel motherboards. Our sales and marketing teams work closely with our customers to define product features, performance and timing of new products so that the products we are developing meet our customers' needs...

  • Page 19
    ... customers and channel partners; control over industry standards, PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system, or BIOS, suppliers and software companies as well as the graphics interface for Intel platforms; and marketing...

  • Page 20
    ... to invest heavily in marketing, research and development, new manufacturing facilities and other technology companies. To the extent Intel manufactures a significantly larger portion of its microprocessor products using more advanced process technologies, or introduces competitive new products into...

  • Page 21
    ... engineering teams located in Canada, India, Germany, United Kingdom, Singapore, China, Japan, and Taiwan. Manufacturing Arrangements and Assembly and Test Facilities Third-Party Foundry Facilities GLOBALFOUNDRIES, Inc. On March 2, 2009, together with Advanced Technology Investment Company LLC...

  • Page 22
    ... lead to gains in graphics processing performance, lower power consumption and lower per unit manufacturing costs. Other Third-Party Manufacturers We outsource board-level graphics product manufacturing to third-party manufacturers. These include Foxconn and PC Partner with locations in China. Our...

  • Page 23
    ...000 sq. ft. of the Singapore facility is currently vacant. The facility is 380,000 square feet in total. Wafers for our graphics products are delivered from the third party foundry to our test, assembly and packaging partners, which include Advanced Semiconductor Engineering Group, Amkor, King Yuan...

  • Page 24
    ... manufacture, sorting and/or intermediate testing of semiconductor products and in the design and/or post-fabrication delivery testing of semiconductor products is owned jointly by us and GF. Backlog We sell standard lines of products. Sales are made primarily pursuant to purchase orders for current...

  • Page 25
    ... customers and channel partners; control over industry standards, PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system, or BIOS, suppliers and software companies as well as the graphics interface for Intel platforms; and marketing...

  • Page 26
    ... to invest heavily in marketing, research and development, new manufacturing facilities and other technology companies. To the extent Intel manufactures a significantly larger portion of its microprocessor products using more advanced process technologies, or introduces competitive new products into...

  • Page 27
    ...of 2009 and the first half of 2010. If we experience supply constraints, we may be required to allocate these products amongst our customers. Some of the manufacturers we use also fabricate wafers and assemble, test and package products for other companies, including certain of our competitors. They...

  • Page 28
    ... advantage of the shift by integrated device manufacturers to a fabless business model, we cannot assure you that our relationship with GF and ATIC will result in the full realization of these or any other benefits. Pursuant to the Wafer Supply Agreement between us and GF, we compensate GF on a cost...

  • Page 29
    ... on our 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...

  • Page 30
    ...upon the continued service of numerous qualified engineering, marketing, sales and executive personnel. If we are unable to successfully hire a chief executive officer or to continue to attract, train, and retain qualified personnel, the progress of our product development programs could be hindered...

  • Page 31
    ... to pay dividends or make other distributions to us; use the proceeds from sales of assets; enter into certain types of transactions with affiliates; and consolidate or merge or sell our assets as an entirety or substantially as an entirety. In addition, the guarantee agreement related to the euro...

  • Page 32
    ... is critical to achieving revenue growth. We believe that the main factors that determine our product competitiveness are timely product introductions, product quality, power consumption (including battery life), reliability, selling price, speed, size (or form factor), cost, adherence to industry...

  • Page 33
    ... a more advanced process technology can contribute to lower product manufacturing costs and improve a product's performance and power efficiency. Some competitors may have greater access or rights to companion technologies, including interface, processor and memory technical information. Competitive...

  • Page 34
    ... engineering fees charged for design and development services, as well as royalties paid to us by these third parties. Our royalty revenues are directly related to the sales of these products and reflective of their success in the market. If these third parties do not include our graphics technology...

  • Page 35
    ... the transportation of our work-in-process and finished products among our facilities, our manufacturing suppliers and to our customers. In addition, we rely on third parties to provide certain information technology services to us, including helpdesk support, desktop application services, business...

  • Page 36
    ... limited levels of product returns. Our agreements with AIBs protect their inventory of our products against price reductions. We defer the gross margins on our sales to distributors and AIBs, resulting from both our deferral of revenue and related product costs, until the applicable products...

  • Page 37
    ... in increased volatility in the United States economy and worldwide financial markets. Unfavorable currency exchange rate fluctuations could continue to adversely affect us. We have costs, assets and liabilities that are denominated in foreign currencies, primarily the euro and Canadian dollar. As...

  • Page 38
    ... independently develop similar products, duplicate our products or design around our patents and other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property on a worldwide basis in a costeffective manner. In jurisdictions where foreign laws provide...

  • Page 39
    ... to be subject to various United States and foreign environmental laws and regulations, including those relating to materials used in our products and manufacturing processes, discharge of pollutants into the environment, the treatment, transport, storage and disposal of solid and hazardous wastes...

  • Page 40
    ... current reports under the Securities Exchange Act of 1934 that remain unresolved. ITEM 2. PROPERTIES At December 25, 2010, we owned principal research and development, engineering, manufacturing, warehouse and administrative facilities located in the United States, Canada, Taiwan, China, Singapore...

  • Page 41
    ... assembly and test facilities. As of December 25, 2010, we also leased approximately 3.2 million square feet of space for engineering, manufacturing, warehouse and administrative use, including a number of smaller regional sales offices located in commercial centers near customers, principally in...

  • Page 42
    ... of Wisconsin On October 23, 2006, Silicon Graphics Inc. (SGI) filed a patent infringement lawsuit against ATI and AMD in the United States District Court for the Western District of Wisconsin, the original SGI v. ATI suit. SGI alleged that certain ATI products infringe U.S. Patent No. 6,650,327...

  • Page 43
    ...wafer fabrication process prior to 1979. In 1991, the Company received Final Site Clean-up Requirements Orders from the California Regional Water Quality Control Board relating to the three sites. We have entered into settlement agreements... costs may change....of business. In the opinion of management, ...

  • Page 44
    ...OF EQUITY SECURITIES Our common stock (symbol "AMD") is listed on the New York Stock Exchange. On February 14, 2011, there were 7,389 registered holders of our common stock. The following table sets forth on a per share basis the high and low intra-day sales prices on the New York Stock Exchange for...

  • Page 45
    ... 25, 2010. The past performance of our common stock is no indication of future performance. Comparison of Cumulative Five Year Total Return $150 $100 $50 $0 2005 2006 2007 2008 2009 2010 Advanced Micro Devices, Inc. S&P 500 Index S&P 500 Semiconductors Index Company / Index Base Period 12...

  • Page 46
    ... of the GF manufacturing joint venture transaction. Total assets decreased by $3,875 million from 2007 to 2008, primarily due to the impairment of ATI acquisition-related goodwill and acquired intangible assets, lower cash, cash equivalents and marketable securities used to fund our operations, and...

  • Page 47
    ...• x86 microprocessors, for the commercial and consumer markets, embedded microprocessors for commercial, commercial client and consumer markets and chipsets for desktop and notebook PCs, professional workstations and servers; and graphics, video and multimedia products for desktop and notebook PCs...

  • Page 48
    ...2009. Beginning in the first quarter of 2010, we deconsolidated GF, and began accounting for our investment in GF under the equity method of accounting. Entering 2011, we announced that we will be applying the cost method of accounting for our investment in GF, and will no longer recognize any share...

  • Page 49
    ... Class B Ordinary Shares at the then applicable Class B Conversion Rate. Each Class B Preferred Share will also automatically convert into Class B Ordinary Shares at the then applicable Class B Conversion Rate upon the earlier of (i) an initial public offering of GF (IPO) or (ii) a change of control...

  • Page 50
    ... We had the right to designate three directors to the GF Board as of December 26, 2009. Pursuant to the Shareholders' Agreement, if a change of control of AMD occurs within two years of Closing, ATIC will have the right to put any or all GF securities (valued at their fair market value) held by ATIC...

  • Page 51
    ...pricing for microprocessor products will remain as set forth in the Wafer Supply Agreement, but our purchase commitments to GF will no longer apply. Governance Changes, Funding and Accounting in 2010 Deconsolidation of GF On December 18, 2009, ATIC International Investment Company (ATIC II) acquired...

  • Page 52
    ... new GF shares of $232 million, which we recorded as part of the equity in net loss of investee line item on our consolidated statement of operations. GLOBALFOUNDRIES Singapore Pte. Ltd. (formerly Chartered) Contribution in Fiscal 2011 On December 27, 2010, ATIC International Investment Company LLC...

  • Page 53
    ...returns and allowances on product sales for estimated future price reductions and other customer incentives in the same period that the related revenues are recorded. We base these estimates on actual historical sales returns, allowances, historical price reductions, market activity, and other known...

  • Page 54
    ...to cost of sales, resulting in a net benefit to our gross margin in that period. Goodwill. Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired. Goodwill amounts are not amortized, but rather are tested for impairment at...

  • Page 55
    ..., chipsets and embedded processors and related revenue; and the Graphics segment, which included graphics, video and multimedia products and related revenue as well as revenue received in connection with the development and sale of game console systems that incorporate our graphics technology...

  • Page 56
    ..., chipsets and embedded processors and related revenue; and the Graphics segment, which includes graphics, video and multimedia products and related revenue as well as revenue received in connection with the development and sale of game console systems that incorporate our graphics technology...

  • Page 57
    ...customers continued to transition to our AMD Opteronâ„¢ 6000 series server platforms. Average selling price of our chipsets products increased primarily due to a shift in product mix. Computing Solutions net revenue of $4.2 billion in 2009 decreased 9% compared to net revenue of $4.6 billion in 2008...

  • Page 58
    ... AMD chipsets with our microprocessor products. Unit shipments of our microprocessors for notebooks increased, especially in the fourth quarter of 2009, due to increased demand in the overall notebook PC market, as end users increasingly demanded notebook PCs over desktop PCs. Computing Solutions...

  • Page 59
    ... to $85 million in 2008. All Other net revenue decreased because we no longer developed new Handheld products, and we experienced reduced customer orders in 2009. We decided to exit the Handheld business after selling certain graphics and multimedia technology assets and intellectual property to...

  • Page 60
    ... 2009 and 2008. 2010 2009 2008 (In millions, except for percentages) Cost of sales ...Gross margin ...Gross margin percentage ...Research and development ...Marketing, general and administrative ...Legal settlement ...Amortization of acquired intangible assets ...Impairment of goodwill and acquired...

  • Page 61
    ... statements no longer directly reflected such credits to cost of sales. However, these credits had a favorable impact on the amounts that we paid GF pursuant to the Wafer Supply Agreement. Expenses Research and Development Expenses Research and development expenses of $1.4 billion in 2010, decreased...

  • Page 62
    ... the agreement AMD and Intel agreed to a new 5-year patent cross license agreement that gives AMD broad rights and the freedom to operate a business utilizing multiple foundries; Intel and AMD waived all claims of breach from the previous license agreement; Intel paid us $1.25 billion; Intel agreed...

  • Page 63
    ... license agreement represents fully paid up licenses by both AMD and Intel for which no future payments or delivery is required. Accordingly, we recognized the entire settlement amount in our 2009 operating results. Amortization of Acquired Intangible Assets and Impairment of Goodwill and Acquired...

  • Page 64
    .... The following table provides a summary of each major type of cost associated with the 2008 and 2002 restructuring plans for the periods presented: 2010 2009 (In millions) 2008 Severance and benefits ...Contract or program terminations ...Asset impairments ...Facility consolidations and closures...

  • Page 65
    ...liability related to certain foreign currency exchange contracts, a gain of $28 million on the sale of certain Handheld assets, and a $25 million gain from a class action legal settlement with DRAM manufacturers. These gains were partially offset by a $27 million foreign exchange loss, a $17 million...

  • Page 66
    ... in connection with the payment we received from Samsung in December 2010 pursuant to the Patent License and Settlement Agreement as well as foreign taxes in profitable locations offset by benefits including the monetization of U.S. research and development credits, an alternative minimum tax...

  • Page 67
    ... retirement of our former Executive Chairman and Chairman of the Board in 2009. In 2010 and 2009, we did not have employee stock-based compensation expense for discontinued operations. For the year ended December 27, 2008, employee stock-based compensation expense included in discontinued operations...

  • Page 68
    ... or at all. Over the longer term, should additional funding be required, such as to meet payment obligations of our long-term debt when due, we may need to raise the required funds through borrowings or public or private sales of debt or equity securities, which may be issued from time to time under...

  • Page 69
    ... of sales and collections during 2009. There was also a decrease in accounts payable and accrued liabilities of $105 million, primarily due to lower purchases reflecting the effect of our cost cutting efforts and timing of payments. Net cash used in operating activities was $692 million in 2008. Net...

  • Page 70
    ... from the AMD China Revolving Credit Line, proceeds of $125 million from the sale of 58 million shares of AMD common stock and warrants to purchase 35 million shares of AMD common stock at an exercise price of $0.01 per share to WCH in connection with the formation of the GF manufacturing joint...

  • Page 71
    ... repurchase of a portion of the silent partnership contributions in AMD Fab 36 KG held by Leipziger Messe and $19 million in payments for the guaranteed return on the unaffiliated limited partners' limited partnership contributions. During 2008, we did not realize any excess tax benefit related to...

  • Page 72
    ... based on an initial conversion rate of 35.6125 shares of common stock per $1,000 principal amount of 6.00% Notes, which is equivalent to an initial conversion price of $28.08 per share. This initial conversion price represents a premium of 100% relative to the last reported sale price of our common...

  • Page 73
    ... permitting restrictions on the ability of our subsidiaries to pay dividends or make other distributions to us; using the proceeds from sales of assets; entering into certain types of transactions with affiliates; and consolidating, merging or selling our assets as an entirety or substantially as an...

  • Page 74
    ... to purchase or otherwise retire the 8.125% Notes with cash, stock or other assets from time to time in open market or private negotiated transactions, either directly or ...ability of our subsidiaries to pay dividends or make other distributions to us; using the proceeds from sales of assets; 66

  • Page 75
    ... in our 2008 restructuring plans. These payments will be made through 2012. Purchase Obligations Total non-cancelable purchase obligations, other than those to GF under the wafer supply agreement, as of December 25, 2010 were $419 million for periods through 2016. Our purchase obligations primarily...

  • Page 76
    ... will pay GF approximately $1.5 billion in 2011 and $1.5 billion in 2012. We based our 2011 and 2012 estimated costs in part on our current expectations regarding GF's manufacturing yields, wafer volumes, and demand for our products. We are not able to meaningfully quantify or estimate our purchase...

  • Page 77
    ...our Digital Television business unit was not directly aligned with our core strategy of computing and graphics market opportunities. Accordingly, we decided to divest this business unit. We performed an interim impairment test of goodwill and acquired intangible assets during 2008. We concluded that...

  • Page 78
    ... primarily of time deposits, money market funds, commercial paper and ARS. With the exception of our ARS, these investments were highly liquid. Due to the short-term nature of our investment portfolio and the current low interest rate environment, our exposure to interest rate risk is minimal. As...

  • Page 79
    ...Canadian dollar, while sales of products are primarily denominated in U.S. dollars. Prior to the deconsolidation of GF in 2009, we also incurred cost and carried assets and liabilities that were denominated primarily in the euro. We maintain a foreign currency hedging strategy, which uses derivative...

  • Page 80
    ... these contracts cannot be included in cost of sales, and mark-to-market gains and losses on these contracts can no longer be deferred until the forecasted transactions occur. For the year ended December 25, 2010, we recorded a loss of $16 million related to these euro currency forward contracts in...

  • Page 81
    ... AND SUPPLEMENTARY DATA Advanced Micro Devices, Inc. Consolidated Statements of Operations Year Ended December 25, December 26, December 27, 2010 2009 2008 (In millions, except per share amounts) Net revenue ...Cost of sales ...Gross margin ...Research and development ...Marketing, general and...

  • Page 82
    Advanced Micro Devices, Inc. Consolidated Balance Sheets December 25, December 26, 2010 2009* (In millions, except par value amounts) ASSETS Current assets: Cash and cash equivalents ...Marketable securities ...Total cash and cash equivalents and marketable securities ...Accounts receivable, net ...

  • Page 83
    Advanced Micro Devices, Inc. Consolidated Statements of Stockholders' Equity Three Years Ended December 25, 2010 (In millions) Number Additional of Paid in Treasury shares Amount Capital stock December 29, 2007 ...606 $ 6 $6,271 $ (95) Comprehensive loss: Net loss attributable to AMD common ...

  • Page 84
    ... of foreign grant and allowance income ...Impairment of goodwill and acquired intangible assets ...Net loss on disposal of property, plant and equipment ...Compensation recognized under employee stock plans ...Non-cash interest expense ...Other than temporary impairment on marketable securities...

  • Page 85
    ... x86 microprocessors, for the commercial and consumer markets, embedded microprocessors for commercial, commercial client and consumer markets and chipsets for desktop and notebook PCs, professional workstations and servers; and (ii) graphics, video and multimedia products for desktop and notebook...

  • Page 86
    ... prices, and latest product costs. The Company also sells its products to distributors under sales arrangements whose terms do not allow for rights of return or price protection on unsold products held by them. In these instances, the Company recognizes revenue when it ships the product directly...

  • Page 87
    ... for use in current operations within the next twelve months. Derivative Financial Instruments. The Company maintains a foreign currency hedging strategy, which uses derivative financial instruments to mitigate the risks associated with changes in foreign currency exchange rates. This strategy takes...

  • Page 88
    ... to as "processors in a box" and for ATI Technologies ULC (ATI)-branded PC workstation products and has offered extended limited warranties to certain customers of "tray" microprocessor products and/or workstation graphics products who have written agreements with the Company and target their...

  • Page 89
    .... Marketing, communications, and advertising expenses for 2010, 2009 and 2008 were approximately $275 million, $313 million and $520 million, respectively. Cooperative advertising funding obligations under customer incentive programs are accrued and the costs recorded upon agreement with customers...

  • Page 90
    ... lattice-binomial option-pricing model requires the use of extensive actual employee exercise behavior data and the use of a number of complex assumptions including expected volatility of the Company's common stock, risk-free interest rate, and expected dividends. Significant changes in any of these...

  • Page 91
    ... 2009, upon the settlement of the Intel litigation (discussed in Note 11) and the execution of a patent cross license agreement between the Company and Intel, the requirements satisfying the Reconciliation Event were met. As a result, GF's Class A and Class B Preferred Shares vote on an as converted...

  • Page 92
    ... Share automatically converts into Class B Ordinary Shares at the then applicable Class B Conversion Rate upon the earlier of (i) an initial public offering of GF (IPO) or (ii) a change of control transaction of GF. The initial "Class B Conversion Rate" is 100 Class B Ordinary Shares for each Class...

  • Page 93
    .... The Company had the right to designate three directors to the GF Board as of December 26, 2009. Pursuant to the Shareholders' Agreement, if a change of control of AMD occurs within two years of Closing, ATIC will have the right to put any or all GF securities (valued at their fair market value...

  • Page 94
    ...as set forth in the Wafer Supply Agreement, but the Company's purchase commitments to GF will no longer apply. Governance Changes, Funding and Accounting in 2010 Deconsolidation of GF On December 18, 2009, ATIC International Investment Company (ATIC II) acquired Chartered Semiconductor Manufacturing...

  • Page 95
    ... November 17, 2010, the equity securities issued by GF consisted of 20% of Class A Preferred Shares and 80% of Class B Preferred Shares. On November 24, 2010, the Company, ATIC and GF signed a letter agreement regarding fundings of GF. Pursuant to this letter agreement, the parties agreed that the...

  • Page 96
    ...has recognized in excess of the value of its investment in GF since the Company began accounting for GF under the equity method of accounting. Based on the current structure of the Company's Wafer Supply Agreement, its guarantee of certain GF indebtedness, its ownership interest in GF and governance...

  • Page 97
    ... reflects the changes in noncontrolling interest for the three years ended December 25, 2010. (In millions) Balance at December 29, 2007 ...Debt accretion ...Purchase of Fab 36 Beteiligungs GmbH limited partner contributions ...Return of limited partner contributions ...Foreign exchange translation...

  • Page 98
    ... and Acquired Intangible Assets $218 245 63 34 138 $698 $179 180 75 43 318 $795 Goodwill The Company recorded goodwill as a result of the ATI acquisition in 2006. The changes in the carrying amounts of goodwill by segment through December 25, 2010 were as follows: Computing Solutions Graphics All...

  • Page 99
    ... of the acquisition-related intangible assets associated with our Computing Solutions and Graphics segments and its Handheld business unit were impaired primarily due to the revised lower revenue forecasts associated with the products incorporating the developed product technology, the customer 91

  • Page 100
    ... "Impairment of goodwill and acquired intangible assets" in its 2008 consolidated statement of operations. The balances of acquisition-related intangible assets as of December 25, 2010, were as follows: Developed product technology Game console royalty agreements Trademark and trade name Customer...

  • Page 101
    ...'s consolidated balance sheets. At December 26, 2009, the Company had approximately $45 million of available-for-sale investment in money market funds and commercial paper used as collateral for long-term workers' compensation, leased buildings, foreign exchange hedging activities, and letter of...

  • Page 102
    ... rate securities ...Total classified as marketable securities ...Classified as other assets: Money market funds ...Equity securities ...Total classified as other assets ...Total assets measured at fair value ...Liabilities Classified as accrued liabilities-Foreign currency derivative contracts...

  • Page 103
    ... value. Investments in money market mutual funds, commercial paper, time deposits, marketable equity securities and foreign currency derivative contracts are primarily classified within Level 1 or Level 2. This is because such financial instruments are valued primarily using quoted market prices or...

  • Page 104
    ... credit markets have affected all of the Company's ARS investments and auctions for these securities have failed to settle on their respective settlement dates. As a result, reliable Level 1 or Level 2 pricing is not available for these ARS. In light of these developments, the Company performs its...

  • Page 105
    ... supplier for silicon-on-insulator (SOI) wafers to manufacture the Company's products. The Company is also dependent on certain equipment and materials from a limited number of suppliers and relies on a limited number of foreign companies to supply the majority of certain types of integrated circuit...

  • Page 106
    ... Taxes The provision for income taxes consists of: 2010 2009 2008 (In millions) Current: U.S. Federal ...U.S. State and Local ...Foreign National and Local ...Total ...Deferred: U.S. Federal ...U.S. State and Local ...Foreign National and Local ...Total ...Provision for income taxes ...Income...

  • Page 107
    ... ...Accrued expenses not currently deductible ...Acquired intangibles ...Tax deductible goodwill ...Investments ...Federal and state tax credit carryovers ...Foreign capitalized research and development costs ...Foreign research and development ITC credits ...Discount of convertible notes ...Other...

  • Page 108
    ...$ 0 $ 30 $ 134 N/A N/A 2012 to 2030 2011 to 2030 2018 2011 to 2030 no expiration 2012 to 2017 various Utilization of $81 million of the Company's U.S. federal net operating loss carryforwards are subject to annual limitations as a result of the ATI acquisition and prior purchase transactions. 100

  • Page 109
    ... income tax expense or a cash payment to the Internal Revenue Service, but may result in the utilization of deferred tax assets that are currently subject to a valuation allowance. The Company's operations in Singapore and Malaysia currently operate under tax holidays, which will expire in whole or...

  • Page 110
    ..., has completed its audit of ATI for the years 2000 through 2004 and issued its final Notice of Assessment. During the second quarter of 2010, the U.S. Internal Revenue Service completed its audit of the U.S. Federal income tax returns for the years ending 2004 through 2006 inclusive. As of December...

  • Page 111
    ... $20.13 per share. This initial conversion price represents a premium of 50% relative to the last reported sale price of the Company's common stock on August 8, 2007 (the trading date preceding the date of pricing of the 5.75% Notes) of $13.42 per share. This initial conversion rate will be adjusted...

  • Page 112
    ... Trustee. In the first quarter of 2009, the Company adopted the new guidance for accounting for convertible debt that may be fully or partially settled in cash upon conversion and modified its accounting for its 6.00% Notes. To retrospectively apply this new guidance, the proceeds from the issuance...

  • Page 113
    ... conversion rate of 35.6125 shares of common stock per $1,000 principal amount of 6.00% Notes, which is equivalent to an initial conversion price of $28.08 per share. This initial conversion price represents a premium of 100% relative to the last reported sale price of the Company's common stock...

  • Page 114
    ... its subsidiaries to pay dividends or make other distributions to the Company; using the proceeds from sales of assets; entering into certain types of transactions with affiliates; and consolidating, merging or selling our assets as an entirety or substantially as an entirety. The 8.125% Notes rank...

  • Page 115
    ... restrictions on the ability of its subsidiaries to pay dividends or make other distributions to the Company; using the proceeds from sales of assets; entering into certain types of transactions with affiliates; and consolidating, merging or selling its assets as an entirety or substantially as...

  • Page 116
    ... ratio in effect on the date of conversion. The Class B Notes will automatically convert into GF Class B Preferred Shares upon the earlier of (i) an IPO, (ii) certain change of control transactions of GF or (iii) the close of business on the business day immediately preceding the maturity date...

  • Page 117
    ... to purchase from the AMD parties invoices of specified AMD customers up to credit limits set by the IBM parties. As of December 25, 2010, only selected distributor customers have participated in this program. Because the Company does not recognize revenue until its distributors sell its products to...

  • Page 118
    ... settlement amount in its 2009 operating results. NOTE 12: Supplemental Statement of Operations Information Gain on sale of 200 millimeter equipment and the license of related process technology During 2008, in conjunction with the conversion of Fab 30, the Company's former manufacturing facility...

  • Page 119
    ... addressed operating performance using the following three reportable segments the Computing Solutions segment, which included microprocessors, chipsets and embedded processors and related revenue; the Graphics segment, which included graphics, video and multimedia products and related revenue; and...

  • Page 120
    ..., chipsets and embedded processors and related revenue; the Graphics segment, which included graphics, video and multimedia products and related revenue as well as revenue received in connection with the development and sale of game console systems that incorporate its graphics technology...

  • Page 121
    ... discrete asset information. The following table provides a summary of net revenue and operating income (loss) by segment for 2009 and 2008, applying the segment structure that was in place as of December 27, 2008: 2009 2008 (In millions) Net revenue: Computing Solutions ...Graphics ...All Other...

  • Page 122
    ... Solutions segment. NOTE 14: Stock-Based Incentive Compensation Plans The Company's stock-based incentive programs are intended to attract, retain and motivate highly qualified employees. On April 29, 2004, the Company's stockholders approved the 2004 Equity Incentive Plan (the 2004 Plan). Equity...

  • Page 123
    ... the 2004 Plan and may be reissued as new awards. The Company also has stock options outstanding under previous equity compensation plans that were in effect before April 29, 2004 as well as equity compensation plans that the Company assumed as part of its acquisition of ATI. Reserved shares that...

  • Page 124
    ... stock options, restricted stock and restricted stock units and employee stock purchases under the Company's employee stock purchase plan was allocated in the consolidated statements of operations as follows: 2010 2009 2008 (In millions) Cost of sales ...Research and development ...Marketing...

  • Page 125
    ... conditions established by the Compensation Committee of the Board of Directors, and are based either on continued service or continued service and performance. The cost of restricted stock units and restricted stock awards is determined using the fair value of the Company's common stock on the date...

  • Page 126
    ... stock units and awards) under the 2004 Plan, the Company's prior equity compensation plans and the assumed ATI plans. NOTE 15: Other Employee Benefit Plans Retirement Savings Plan. The Company has a retirement savings plan, commonly known as a 401(k) plan, that allows participating employees...

  • Page 127
    ... wafer supply agreement, as of December 25, 2010 were $419 million for periods through 2016. The Company's purchase obligations primarily include obligations to purchase wafers and substrates from third parties. The Company currently estimates that it will pay GF approximately $1.5 billion in 2011...

  • Page 128
    ... to as "processors in a box" and for ATI Technologies ULC (ATI)-branded PC workstation products and has offered extended limited warranties to certain customers of "tray" microprocessor products and/ or workstation graphics products who have written agreements with the Company and target their...

  • Page 129
    ... United States in the wafer fabrication process prior to 1979. In 1991, the Company received Final Site Clean-up Requirements Orders from the California Regional Water Quality Control Board relating to the three sites. The Company has entered into settlement agreements with other responsible parties...

  • Page 130
    ... potential loss, if any. Based upon the information currently known to management, the Company does not believe that the ultimate resolution of this lawsuit will have a material effect upon its financial condition or results of operations. Graphics Properties Holdings, Inc. (GPHI) v. Dell, Alienware...

  • Page 131
    ... Digital Television business unit was not directly aligned with its core strategy of computing and graphics market opportunities. Accordingly, the Company decided to divest this business unit. The Company performed an interim impairment test of goodwill and acquired intangible assets during 2008 and...

  • Page 132
    ... Events Cost method of accounting for investment in GLOBALFOUNDRIES On December 27, 2010, pursuant to the Contribution Agreement, ATIC II, contributed all of the outstanding Ordinary Shares of GFS to GF in exchange for 2,808,981 newly issued shares of GF Class A Preferred Shares. In connection...

  • Page 133
    ... the equity method to the cost method of accounting. Under the cost method of accounting, the Company no longer recognizes any share of GF's net income or loss in its statement of operations. The Company will review the carrying value of its investment in GF for impairment at each reporting period...

  • Page 134
    ... fairly in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Advanced Micro Devices, Inc.'s internal control over financial reporting as of December 25, 2010, based...

  • Page 135
    .... Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the Company's internal control over financial reporting as of December 25, 2010, which is included immediately following this report. By: /s/ Thomas J. Seifert Name: Thomas J. Seifert Title...

  • Page 136
    ... Registered Public Accounting Firm The Board of Directors and Shareholders of Advanced Micro Devices, Inc. We have audited Advanced Micro Devices, Inc.'s internal control over financial reporting as of December 25, 2010, based on criteria established in Internal Control-Integrated Framework...

  • Page 137
    ...the Company used a 52-week fiscal year ending on the last Saturday in December. All of the quarters in 2010 and 2009 consisted of 13 weeks. Dec. 25 2010 Sep. 25 Jun. 26 Mar. 27 Dec. 26 2009 Sep. 26 Jun. 27 Mar. 28 Net revenue ...Cost of sales ...Gross margin ...Research and development ...Marketing...

  • Page 138
    ...to the settlement agreement, Intel paid the Company $1,250 million and the Company recorded a $1,242 million gain net of certain expenses in 2009. On December 22, 2010, the Company entered into settlement agreement with Samsung. Pursuant to the settlement agreement, Samsung agreed to pay the Company...

  • Page 139
    ... or the Exchange Act, such as this Annual Report on Form 10-K is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our interim Chief Executive Officer and...

  • Page 140
    ... 2010 Summary Compensation Table, 2010 Nonqualified Deferred Compensation, Outstanding Equity Awards at 2010 Fiscal Year-End, Grants of PlanBased Awards in 2010 and Option Exercises and Stock Vested in 2010), "Employment and Related Agreements" and "Change in Control Arrangements" in our 2011 Proxy...

  • Page 141
    ... ULC and ATI Technologies Inc. dated as of July 23, 2006 filed as Exhibit 2.2 to AMD's Current Report on Form 8-K dated July 23, 2006, is hereby incorporated by reference. Asset Purchase Agreement by and among Broadcom Corporation, Broadcom International Limited, and Advanced Micro Devices, Inc...

  • Page 142
    ... by reference. AMD's U.S. Stock Option Program for options granted after April 25, 2000, filed as Exhibit 10.14 to AMD's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, is hereby incorporated by reference. Advanced Micro Devices, Inc. 2006 Executive Incentive Plan, filed as...

  • Page 143
    ...AMD's U.S. Stock Option Program for options granted after April 24, 2001, filed as Exhibit 10.23(a) to AMD's Annual Report on Form 10-K for the fiscal year ended December 30, 2001, is hereby incorporated by reference. Third Amended and Restated Advanced Micro Devices, Inc. 2004 Equity Incentive Plan...

  • Page 144
    ...Agreement by and among Advanced Micro Devices, Inc., AMD Investments, Inc., Fujitsu Limited, and Spansion Inc. dated as of December 21, 2005 filed as Exhibit 10.8 to AMD's Current Report on Form 8-K dated December 15, 2005, is hereby incorporated by reference. ATI Technologies Inc. Share Option Plan...

  • Page 145
    ..., Inc., Advanced Technology Investment Company LLC and GlobalFoundries Inc. dated December 27, 2010. **10.46 Wafer Supply Agreement dated March 2, 2009 by and among Advanced Micro Devices, Inc., The Foundry Company and AMD Fab Technologies US Inc., filed as Exhibit 10.5 to AMD's Current Report on...

  • Page 146
    ... Exhibit 10.63 to AMD's Annual Report on Form 10-K for the fiscal year ended December 26, 2009 is hereby incorporated by reference. Settlement Agreement dated November 17, 2009 between Advanced Micro Devices, Inc. and Intel Corporation filed as Exhibit 10.1 to AMD's Current Report on Form 8-K dated...

  • Page 147
    ... to Section 906 of the Sarbanes-Oxley Act of 2002. Annual CEO Certification (Section 303A.12(a)) Consolidated Financial Statements of GLOBALFOUNDRIES Inc. for the fiscal year ended December 25, 2010 and for the period from March 2, 2009 to December 26, 2009. XBRL Instance Document XBRL Taxonomy...

  • Page 148
    ... authorized. February 18, 2011 ADVANCED MICRO DEVICES, INC. By: /S/ THOMAS J. SEIFERT Thomas J. Seifert Senior Vice President, Chief Financial Officer and Interim Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 149
    SCHEDULE II ADVANCED MICRO DEVICES, INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 27, 2008, December 26, 2009 and December 25, 2010 (In millions) Additions Charged (Reductions Credited) To Operations Balance Beginning of Period Deductions(1) Balance End of Period Allowance for ...

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