Crucial 2011 Annual Report Download - page 58

Our maximum exposure to loss from our ownership in our equity method investments that are VIEs was as follows:
The maximum exposure to loss primarily included our investment balance as well as the related translation adjustments in accumulated other
comprehensive income and receivables, if any. We may also incur losses in connection with our obligations under a supply agreement with
Inotera (the "Inotera Supply Agreement") for rights and obligations to purchase 50% of Inotera's wafer production capacity of DRAM products.
Inotera and MeiYa DRAM joint ventures with Nanya
We have partnered with Nanya in two Taiwanese DRAM memory companies, Inotera and MeiYa. Under a licensing arrangement with
Nanya, we recognized
$65 million and $105 million of license revenue in net sales during 2010 and 2009, respectively, and had recognized a total
of $207 million through the completion of the arrangement in April 2010. Under a cost-sharing arrangement beginning in April 2010, we share
equally in DRAM development costs with Nanya and, as a result, our research and development costs were reduced by $141 million and $51
million in 2011 and 2010, respectively. In addition, we received $25 million and $6 million of royalty revenue in 2011 and 2010, respectively,
from Nanya for sales of stack DRAM products manufactured by or for Nanya on process nodes of 50nm or higher and will continue to receive
royalties from Nanya associated with technology developed prior to the cost-sharing arrangement.
Inotera : In the first quarter of 2009, we acquired a 35.5% ownership interest in Inotera. As a result of Inotera's sale of common shares in a
public offering, our equity ownership interest decreased from 35.5% to 29.8% and we recognized a gain of $56 million in the first quarter of
2010. In the second quarter of 2010, as part of another Inotera offering of common shares, we and Nanya each paid $138 million to purchase
additional shares, slightly increasing our equity ownership interest from 29.8% to 29.9% . In 2011, our ownership interest was reduced by shares
issued under Inotera's employee stock plans and as of September 1, 2011 , we held a 29.7% ownership interest in Inotera, Nanya held a 29.8%
ownership interest, and the balance was publicly held.
The carrying value of our initial investment was less than our proportionate share of Inotera's equity. This difference is being amortized as a
credit to earnings through equity in net income (loss) of equity method investees (the "Inotera Amortization"). As of September 1, 2011 , $74
million of Inotera Amortization remained to be recognized of which $49 million is scheduled to be amortized in 2012 with the remaining amount
to be amortized through 2034. The $56 million gain recognized in the first quarter of 2010 on Inotera's issuance of shares included $33 million of
accelerated Inotera Amortization.
Because of significant market declines in the selling price of DRAM, Inotera incurred net losses of $278 million for the six-month period
ended June 30, 2011. Also, Inotera's current liabilities exceeded its current assets by $2.3 billion as of June 30, 2011, which exposes Inotera to
liquidity risk. Inotera's management has developed plans to improve its liquidity. There can be no assurance that Inotera's plan to improve its
liquidity will be successful.
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As of
2011 2010
Current assets
$
942
$
898
Noncurrent assets (primarily property, plant and equipment)
4,189
3,537
Current liabilities
3,201
1,479
Noncurrent liabilities
173
900
For the years ended 2011 2010 2009
Net sales
$
1,839
$
1,927
$
670
Gross margin
(268
)
73
(370
)
Operating loss
(559
)
(181
)
(473
)
Net loss
(594
)
(237
)
(553
)
As of 2011
Inotera
$
325
MeiYa
1
Transform
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