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Acquisition
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Dec. 28, 2013
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| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition |
Acquisition
On March 23, 2012, the Company acquired SeaMicro, Inc. (SeaMicro), a privately held company that produced energy-efficient, high-bandwidth microservers. At the time of the acquisition of SeaMicro, AMD planned to accelerate its strategy to deliver disruptive server technology to its OEM customers serving Cloud-centric data centers.
The total consideration paid to acquire SeaMicro was $312 million, not including cash acquired of $19 million. In addition, the Company incurred $6 million in transaction costs, which were included in marketing, general and administrative expenses on the Company's consolidated statement of operations. The Company paid $293 million in cash to the holders of all outstanding shares of SeaMicro capital stock. As part of the acquisition, the Company assumed all outstanding vested and unvested SeaMicro stock options and unvested restricted stock held by continuing SeaMicro employees as of March 23, 2012. The assumed options were exchanged for approximately 1,652,000 vested and 4,792,000 unvested AMD stock options. The assumed restricted stock was exchanged for approximately 322,000 the Company restricted shares. The stock options and restricted shares continue to have the same terms and conditions as under SeaMicro's option plan. The fair value attributable to pre-combination employee service as of the March 23, 2012 closing for the stock options and restricted shares assumed, which was part of the consideration paid to acquire SeaMicro, was $19 million. The fair value for the stock options assumed was determined using a binomial option-pricing valuation model.
The total cash consideration of $293 million included $29 million deposited into an escrow account as security for any breaches by SeaMicro of representations, warranties and covenants under the acquisition agreement. The escrow funds, less amounts of any valid indemnification claims, were disbursed by the escrow agent to the former stockholders of SeaMicro in March 2013.
The acquisition was accounted for using the purchase method of accounting in accordance with Accounting Standard Codification (ASC) 805, Business Combinations. Accordingly, the total consideration was assigned to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Fair values were determined by the Company's management based on information available at the date of acquisition. After the closing of the acquisition, the results of operations of SeaMicro are included in the Computing Solutions segment in the Company's consolidated financial statements.
The assets acquired and liabilities assumed based on the estimated fair value of SeaMicro were as follows:
The developed technology of SeaMicro relates to SeaMicro's SM10000 server offerings, which is built around a parallel array of independent ultra-low power processors, and it serves to integrate computation, switching, server management and load balancing. In addition to developed technology, SeaMicro had in-process research and development projects, which were incomplete at the time of the acquisition. The value of developed technology and in-process research and development was determined based on the present value of estimated expected cash flows attributable to the technology. The customer relationships related to the ability to sell existing, in-process and future versions of the technology to SeaMicro's existing customers and were valued based on incremental cash flows generated from the existing customer base. The trade name related to the SeaMicro brand names. The goodwill was primarily attributed to premiums paid for synergies between the Company and SeaMicro and the assembled workforce and is not deductible for tax purposes. The acquired developed technology, customer relationships and trade name are amortized on a straight-line basis over their estimated useful lives. The acquired in-process research and development and goodwill associated with the acquisition are categorized as indefinite-lived intangible assets and subject to impairment review. Capitalized acquired in-process research and development costs will remain capitalized until such time as the projects are complete, at which point they will be amortized, or they will be written off when it is probable the projects will not be completed. As of December 28, 2013, approximately $5 million of in-process research and development projects were completed and classified as developed technology, and the Company started to amortize these projects on a straight-line basis over their estimated useful lives.
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