8-KFinancial EventsOther Events

ADVANCED MICRO DEVICES INC 8-K Report, Material Impairment (Jul 11, 2008)

Filed July 11, 2008For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) filed an 8-K report on July 10, 2008, detailing significant financial events impacting its second fiscal quarter of 2008. The company announced a substantial goodwill and intangible asset impairment charge of approximately $880 million, primarily related to its Handheld and DTV reporting units acquired from ATI Technologies. This impairment arises from these business segments not performing as expected and is a non-cash charge. Additionally, AMD is implementing a restructuring plan aimed at reducing its breakeven point, which involves employee terminations and is expected to result in a restructuring charge of approximately $32 million, with a majority already paid in severance. The company also anticipates other-than-temporary investment impairment charges of about $36 million, including $24 million related to its investment in Spansion Inc. and $12 million from Auction Rate Securities.

Key Highlights

  • 1AMD recorded an estimated $880 million goodwill and intangible asset impairment charge for its Handheld and DTV reporting units.
  • 2The impairment is attributed to underperformance of acquired ATI Technologies segments and is a non-cash charge.
  • 3The company is undertaking a restructuring plan to lower its breakeven point, expecting a $32 million charge for employee terminations.
  • 4A significant portion of the restructuring charge relates to employee severance, with most payments already made.
  • 5AMD expects to recognize approximately $36 million in other-than-temporary investment impairment charges.
  • 6These investment impairments include $24 million for Spansion Inc. and $12 million for Auction Rate Securities.
  • 7The company anticipates a materially favorable impact on its Q2 2008 gross margin of approximately $190 million from the sale of certain 200mm wafer fabrication tools.

Frequently Asked Questions

The primary reason for the substantial goodwill and intangible asset impairment charge of approximately $880 million is the underperformance of AMD's Handheld and DTV reporting units, which were acquired from ATI Technologies. These segments have not met the company's expectations.

No, the impairment charges for goodwill and intangible assets are non-cash charges. AMD explicitly states that it will not be required to make any current or future cash expenditures as a result of these specific impairment charges.

The restructuring plan is designed to reduce AMD's breakeven point. It primarily involves employee terminations. The company expects to record a restructuring charge of approximately $32 million in the second quarter of 2008, with a majority of this related to employee severance costs, many of which have already been paid.

Yes, AMD expects to recognize a materially favorable impact on its gross margin for the second quarter of 2008, estimated at approximately $190 million, due to the sale of certain 200mm wafer fabrication tools.