Summary of ADVANCED MICRO DEVICES INC

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this report include forward-looking statements. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including "believes," "expects," "may," "will," "should," "seeks," "intends," "plans," "pro forma," "estimates," or "anticipates" or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. The forward-looking statements relate to, among other things: the demand for our products; the growth and competitive landscape of the markets in which we participate; the credit market crisis and other macro-economic challenges currently affecting the global economy which continues to adversely impact end-user demand for computers and other information technology (IT) products; our cost reduction efforts and related restructuring charge; our ability to liquidate our auction rate securities in the next twelve months; our capital expenditures; our aggregate contractual obligations; the AMTC and BAC joint ventures; and availability of external financing. Material factors and assumptions that were applied in making these forward-looking statements include, without limitation, the following: (1) the expected rate of market growth and demand for our products and technologies (and the mix thereof); (2) our expected market share; (3) our expected product and manufacturing costs and average selling prices; (4) our overall competitive position and the competitiveness of our current and future products; (5) our ability to introduce new products and transition to more advanced manufacturing process technologies, consistent with our current plans; (6) our ability to make additional investment in research and development and that such opportunities will be available; and (7) the expected demand for computers. Material factors that could cause actual results to differ materially from current expectations include, without limitation, the following: (1) that Intel Corporation's pricing, marketing and rebating programs, product bundling, standard setting, new product introductions or other activities may negatively impact sales;
(2) that our substantial indebtedness could adversely affect our financial position and prevent us from implementing our strategy or fulfilling our contractual obligations; (3) that we will require additional funding and may be unable to raise sufficient capital, on favorable terms, or at all; (4) that we may be unable to maintain the level of investment in research and development that is required to remain competitive; (5) that we may be unable to develop, launch and ramp new products and technologies in the volumes required by the market at mature yields on a timely basis; (6) that we may be unable to transition to advanced manufacturing process technologies in a timely and effective way; (7) that there may be unexpected variations in market growth and demand for our products and technologies in light of the product mix that we may have available at any particular time; (8) that demand for computers will be lower than currently expected; (9) that we may under-utilize GLOBALFOUNDRIES' and our own manufacturing facilities; and (10) the effect of political or economic instability, domestically or internationally, on our sales or production.

For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements, see "Part II, Item 1A-Risk Factors" section beginning on page 51 and the "Financial Condition" section beginning on page 39 and such other risks and uncertainties as set forth below in this report or detailed in our other Securities and Exchange Commission (SEC) reports and filings. We assume no obligation to update forward-looking statements.

AMD, the AMD Arrow logo, AMD Opteron, and combinations thereof, ATI and the ATI logo are trademarks of Advanced Micro Devices, Inc. Microsoft is a registered trademark of Microsoft Corporation in the United States and other jurisdictions. Other names are for informational purposes only and are used to identify companies and products and may be trademarks of their respective owners.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report and our audited consolidated financial statements and related notes as of December 27, 2008 and December 29, 2007, and for each of the three years in the period ended December 27, 2008 as filed in our Annual Report on Form 10-K for the year ended December 27, 2008.

Overview

We are a global semiconductor company with facilities around the world. Within the global semiconductor industry, we offer primarily:

• 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 computers, including home media PCs and professional workstations, servers and technology for game consoles.

On October 6, 2008, we entered into a Master Transaction Agreement, which was further amended on December 5, 2008, with Advanced Technology Investment Company LLC, a limited liability company established under the laws of the Emirate of Abu Dhabi and wholly owned by the Government of the Emirate of Abu Dhabi (ATIC), and West Coast Hitech L.P., an exempted limited partnership organized under the laws of the Cayman Islands (WCH), acting through its general partner, West Coast Hitech G.P., Ltd.,

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a corporation organized under the laws of the Cayman Islands, pursuant to which AMD and ATIC agreed to form a manufacturing joint venture, initially named The Foundry Company and later renamed GLOBALFOUNDRIES Inc., an exempted company incorporated under the laws of the Cayman Islands. On March 2, 2009, AMD, ATIC and WCH consummated the transactions contemplated by the Master Transaction Agreement (the Closing). In connection with the Closing, we contributed to GLOBALFOUNDRIES specified front end wafer manufacturing assets and intellectual property.

In this section, we will describe the general financial condition and the results of operations for Advanced Micro Devices, Inc. and its consolidated subsidiaries as well as GLOBALFOUNDRIES and its consolidated subsidiaries, including a discussion of our results of operations for the first quarter of 2009 compared to the first quarter of 2008 and the fourth quarter of 2008, an analysis of changes in our financial condition and a discussion of our contractual obligations and off balance sheet arrangements. For accounting purposes, we are required to consolidate the accounts of GLOBALFOUNDRIES pursuant to FASB Interpretation No. 46R, Consolidation of Variable Interest Entities, An Interpretation of ARB No. 51 (FIN 46R). References in this report to "us," "our," "AMD," or "the Company" include these consolidated operating results.

Net revenue in the first quarter of 2009 was $1.2 billion, approximately flat compared to the fourth quarter of 2008 and a 21 percent decrease compared to the first quarter of 2008. Compared to the fourth quarter of 2008, a 7 percent increase in Computing Solutions net revenue during the first quarter of 2009 was offset by an 18 percent decrease in Graphics net revenue. Net revenue in the first quarter of 2009 decreased compared to the first quarter of 2008 primarily due to a decline in both microprocessor and GPU unit shipments as well as a decrease in microprocessor average selling prices. Unit shipments declined primarily due to the credit market crisis and other macro-economic challenges currently affecting the global economy which continues to adversely impact end-user demand for computers and other IT products.

Gross margin, as a percentage of net revenue for the first quarter of 2009 was 43 percent, a 20 percent increase compared to 23 percent in the fourth quarter of 2008 and a 1 percent increase compared to 42 percent in the first quarter of 2008. However, during the fourth quarter of 2008, we experienced a large incremental write-down of inventory due to a weak economic outlook. This $227 million incremental inventory write-down negatively impacted gross margin in the fourth quarter 2008 by 20 percentage points. A portion of this inventory was sold in the first quarter of 2009, which benefited gross margin by $64 million, or 5 percentage points. Without the impact of the incremental write-down of inventory in the fourth quarter 2008 and the benefit from the sale of a portion of that inventory in the first quarter of 2009, gross margin in the first quarter of 2009 would have declined 5 percentage points compared to the fourth quarter of 2008, primarily due to underutilization of front end wafer manufacturing assets.

Our operating loss for the first quarter of 2009 was $298 million compared to $1.3 billion in the fourth quarter of 2008 and $234 million in the first quarter of 2008. The improvement in operating performance for the first quarter of 2009 compared to the fourth quarter of 2008 was primarily due to impairment charges for goodwill and acquired intangible assets in the fourth quarter of 2008, which did not recur in the first quarter of 2009. The decline in operating performance in the first quarter of 2009 compared to the first quarter of 2008 was primarily due to lower revenue due to a significant decline in unit shipments and lower microprocessor average selling prices.

Despite the global macroeconomic challenges which continued to impact our results in the first quarter of 2009, we had a number of positive achievements. In addition to consummating the GLOBALFOUNDRIES manufacturing joint venture transaction, we continued to make progress towards reducing our costs. In the first quarter of 2009 we implemented additional headcount reductions, primarily focused on our back-end manufacturing and sales, marketing and general and administrative functions. We also implemented temporary salary reductions for employees in the United States and Canada and suspended certain employee benefits such as our 401(k) plan matching program.

In addition, we continued to meet our major engineering roadmap milestones. In January 2009, we launched a number of new products and technologies, including the "Yukon" platform for ultrathin notebooks, the "Dragon" desktop platform and our next generation of graphics processors for notebooks, the ATI Mobility Radeon HD 4000 series of products. Also, in January 2009, we introduced the 45 nanometer AMD Phenom II 9000 series of microprocessors which are true quad-core processors designed for high performance desktop PCs.

Our cash, cash equivalents and marketable securities as of March 28, 2009 was $2.7 billion compared to $1.1 billion in the fourth quarter of 2008. The increase in our cash, cash equivalents and marketable securities was due to the consummation of the GLOBALFOUNDRIES manufacturing joint venture transaction, and of the $2.7 billion, $1.1 billion constituted GLOBALFOUNDRIES cash and cash equivalents.

We intend the discussion of our financial condition and results of operations that follows to provide information that will assist you in understanding our financial statements, the changes in certain key items in those financial statements from year to year, the primary factors that resulted in those changes, and how certain accounting principles, policies and estimates affect our financial statements.

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GLOBALFOUNDRIES

On March 2, 2009, we, ATIC and WCH consummated the transactions contemplated by the Master Transaction Agreement and formed GLOBALFOUNDRIES. At the Closing, we contributed certain assets and liabilities to GLOBALFOUNDRIES, including, among other things, shares of the groups of German subsidiaries owning Fab 30/38 and Fab 36 (Dresden Subsidiaries), certain manufacturing assets, owned real property, tangible personal property, employees, inventories, books and records, a portion of the Company's patent portfolio and intellectual property and technology, rights under certain material contracts and authorizations necessary for GLOBALFOUNDRIES to carry on its business, in exchange for GLOBALFOUNDRIES securities consisting of one Class A Ordinary Share, 1,090,950 Class A Preferred Shares and 700,000 Class B Preferred Shares, and the assumption of certain liabilities by GLOBALFOUNDRIES. ATIC contributed $1.4 billion of cash to GLOBALFOUNDRIES in exchange for GLOBALFOUNDRIES securities consisting of one Class A Ordinary Share, 218,190 Class A Preferred Shares, 172,760 Class B Preferred Shares, $202 million aggregate principal amount of 4% Class A Subordinated Convertible Notes (the Class A Notes) and $807 million aggregate principal amount of 11% Class B Subordinated Convertible Notes (the Class B Notes), and transferred $700 million of cash to us in exchange for the transfer by us of 700,000 GLOBALFOUNDRIES Class B Preferred Shares.

At the Closing, we also issued to WCH, for an aggregate purchase price of $125 million 58 million shares of our common stock and warrants to purchase 35 million shares of our common stock at an exercise price of $0.01 per share (the Warrants). The Warrants are exercisable after the earlier of (i) public ground-breaking of GLOBALFOUNDRIES' planned manufacturing facility in New York and (ii) March 2, 2011. The Warrants expire on March 2, 2019.

Under the Master Transaction Agreement, the cash consideration that WCH and ATIC paid and the securities that they received are as follows:

• Cash paid by WCH to AMD for the purchase of 58 million shares of AMD common stock and Warrants: $125 million;

• Cash paid by ATIC to GLOBALFOUNDRIES for the aggregate principal amount of Class A Notes, which are convertible into 201,810 Class A Preferred Shares: $202 million;

• Cash paid by ATIC to GLOBALFOUNDRIES for the aggregate principal amount of Class B Notes, which are convertible into 807,240 Class B Preferred Shares: $807 million;

• Cash paid by ATIC to GLOBALFOUNDRIES for 218,190 Class A Preferred Shares:
$218 million;

• Cash paid by ATIC to GLOBALFOUNDRIES for 172,760 Class B Preferred Shares:
$173 million;

• Cash paid by ATIC to AMD for 700,000 Class B Preferred Shares: $700 million.

As of the Closing, AMD and ATIC owned 1,090,950, or 83.3%, and 218,190, or 16.7%, respectively, of Class A Preferred Shares, and ATIC owned 100% of the Class B Preferred Shares and 100% of the Class A Notes and Class B Notes.

Class A Preferred Shares. The Class A Preferred Shares rank senior in right of payment to the Ordinary Shares of GLOBALFOUNDRIES and junior in right of payment to the Class B Preferred Shares for purposes of dividends, distributions and upon a Liquidation Event (as defined below). The Class A Preferred Shares are not entitled to any dividend or pre-determined accretion in value. In the event of the liquidation, dissolution or winding up of GLOBALFOUNDRIES (Liquidation Event), each Class A Preferred Share will be entitled to receive, after the distribution to the holders of the Class B Preferred Shares but prior to any distribution to the holders of Ordinary Shares, out of the remaining assets of GLOBALFOUNDRIES, if any, an amount equal to the initial purchase price per share of the Class A Preferred Shares. Each Class A Preferred Share is convertible, at the option of the holder thereof, into Class B Ordinary Shares at the then applicable Class A Conversion Rate upon a Liquidation Event. Each Class A Preferred Share will automatically convert into Class B Ordinary Shares at the then applicable Class A Conversion Rate upon the earlier of (i) an initial public offering of GLOBALFOUNDRIES (IPO) or (ii) a change of control transaction of GLOBALFOUNDRIES. The "Class A Conversion Rate" is 100 Class B Ordinary Shares for each Class A Preferred Share converted, subject to customary anti-dilution adjustments. The Class A Preferred Shares are non-voting until the Reconciliation Event (defined below). Following the Reconciliation Event, each Class A Preferred Share will vote on an as-converted basis with the Ordinary Shares, voting together as a single class, with respect to any question upon which holders of Ordinary Shares have the right to vote.

Class B Preferred Shares. The Class B Preferred Shares rank senior in right of payment to all other classes or series of equity securities of GLOBALFOUNDRIES for purposes of dividends, distributions and upon a Liquidation Event. Each Class B Preferred Share is deemed to accrete in value at a rate of 12% per year, compounded semiannually, of the initial purchase price per such share. The accreted value accrues daily from the Closing and is taken into account upon certain distributions to the holders of Class B

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Preferred Shares or upon conversion of the Class B Preferred Shares. In the event of a Liquidation Event, each Class B Preferred Share will be entitled to receive, prior to any distribution to the holders of any other classes or series of equity securities, an amount equal to its accreted value. Upon completion of the above distribution to the holders of Class B Preferred Shares, each Class A Preferred Share will be entitled to receive its liquidation preference amount out of any remaining assets of GLOBALFOUNDRIES. Upon completion of the above distributions to the holders of Preferred Shares, all of the remaining assets of GLOBALFOUNDRIES, if any, will be distributed pro rata among the holders of Ordinary Shares. Each Class B Preferred Share is convertible, at the option of the holder thereof, into Class B Ordinary Shares at the then applicable Class B Conversion Rate (as hereinafter defined) upon a Liquidation Event. Each Class B Preferred Share automatically converts into Class B Ordinary Shares at the then applicable Class B Conversion Rate upon the earlier of (i) an IPO or (ii) a change of control transaction of GLOBALFOUNDRIES. The "Class B Conversion Rate" is be 100 Class B Ordinary Shares for each Class B Preferred Share converted, subject to customary anti-dilution adjustments. The Class B Preferred Shares are non-voting until the Reconciliation Event (defined below). Following the Reconciliation Event, each Class B Preferred Share will vote on an as-converted basis with the Ordinary Shares, voting together as a single class, with respect to any question upon which holders of Ordinary Shares have the right to vote.

Class A Subordinated Convertible Notes. The Class A Notes accrue interest at a rate of 4% per annum, compounded semiannually, and mature upon the later of
(i) 10 years from the date of issuance or (ii) the date of the earlier of
(i) such time when we have secured for GLOBALFOUNDRIES certain rights under our existing cross license agreement with Intel Corporation (Intel Patent Cross License Agreement), or (ii) such time when GLOBALFOUNDRIES' Board of Directors determines that GLOBALFOUNDRIES no longer needs to be a "Subsidiary" under the Intel Patent Cross License Agreement (the Reconciliation Event). Interest on the Class A Notes is payable semiannually in additional Class A Notes. The Class A Notes are the unsecured obligations of GLOBALFOUNDRIES and rank subordinated in right of payment to any current or future senior indebtedness of GLOBALFOUNDRIES. The Class A Notes are not redeemable by GLOBALFOUNDRIES without the noteholder's consent. The Class A Notes are convertible, in whole or in part, in multiples of $1,000, into GLOBALFOUNDRIES Class A Preferred Shares at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date based on the conversion ratio in effect on the date of conversion, if (i) such conversion would not cause GLOBALFOUNDRIES to fail to constitute our "Subsidiary" under the Intel Patent Cross License Agreement or (ii) the Reconciliation Event has occurred. On or after the Reconciliation Event, the Class A Notes will automatically convert into Class A Preferred Shares upon the earlier of (i) a GLOBALFOUNDRIES initial public offering, (ii) certain change of control transactions of GLOBALFOUNDRIES or (iii) the close of business on the business day immediately preceding the maturity date.

Class B Subordinated Convertible Notes. The Class B Notes accrue interest at a rate of 11% per annum, compounded semiannually, and mature upon the later of
(i) 10 years from the date of issuance or (ii) the date of the Reconciliation Event. Interest on the Class B Notes is payable semiannually in additional Class B Notes. The Class B Notes are the unsecured obligations of GLOBALFOUNDRIES and rank subordinated in right of payment to any current or future senior indebtedness of GLOBALFOUNDRIES. The Class B Notes are not redeemable by GLOBALFOUNDRIES without the noteholder's consent. The Class B Notes are convertible, in whole or in part, in multiples of $1,000, into GLOBALFOUNDRIES Class B Preferred Shares at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date at the conversion ratio in effect on the date of conversion, if (i) such conversion would not cause GLOBALFOUNDRIES to fail to constitute our "Subsidiary" under the Intel Patent Cross License Agreement or (ii) the Reconciliation Event has occurred. On or after the Reconciliation Event, the Class B Notes will automatically convert into GLOBALFOUNDRIES Class B Preferred Shares upon the earlier of (i) a GLOBALFOUNDRIES initial public offering, (ii) certain change of control transactions of GLOBALFOUNDRIES or (iii) the close of business on the business day immediately preceding the maturity date.

For accounting purposes, we consolidate the accounts of GLOBALFOUNDRIES as required by FIN 46R. Based on the structure of the transaction, pursuant to the guidance in FIN 46R, GLOBALFOUNDRIES is a variable-interest entity, and we are deemed to be the primary beneficiary and are, therefore, required to consolidate the accounts of GLOBALFOUNDRIES. Pursuant to the requirements of SFAS 160, which we applied as of the beginning of fiscal 2009, we present ATIC's noncontrolling interest, represented by its equity interests in GLOBALFOUNDRIES, outside of stockholders' equity in our condensed consolidated balance sheet due to the right that ATIC has to put those securities back to us in the event of a change of control of AMD during the two years following the Closing. Our net income
(loss) attributable to our common stockholders per share consists of our consolidated net income (loss), as adjusted for (i) the portion of GLOBALFOUNDRIES' earnings or losses attributable to ATIC, which is based on ATIC's proportional ownership interest in GLOBALFOUNDRIES' Class A Preferred Shares (16.7% as of March 28, 2009), and (ii) the non-cash accretion on GLOBALFOUNDRIES' Class B Preferred Shares attributable to us, based on our proportional ownership interest of GLOBALFOUNDRIES' Class A Preferred Shares (83.3% as of March 28, 2009).

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The table below reflects the changes in noncontrolling interest during the quarter ended March 28, 2009.