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This excerpt taken from the MRVL 10-Q filed Dec 11, 2008. Purchase commitments
In connection with the acquisition of the communication and application processor business of Intel Corporation, the Company entered into a product supply agreement with Intel. Although the Company has met the contractual obligations under the original supply agreement and has transitioned certain products to its fabrication partners, the Company anticipates that it will continue to source certain legacy application processor cellular and handset inventory from Intel. Under terms of an amendment to the supply agreement, the Company has committed to purchase an additional minimum number of wafers through December 2008. The amendment had no impact on the accounting for the original acquisition. As of November 1, 2008, the Company had non-cancellable purchase orders outstanding of $11.4 million under the amended arrangement.
Under the Company’s manufacturing relationships with its other foundries, cancellation of outstanding purchase orders is allowed but requires repayment of all expenses incurred through the date of cancellation. As of November 1, 2008, these foundries had incurred approximately $123.4 million of manufacturing expenses on the Company’s outstanding purchase orders.
On February 28, 2005 and as amended on March 31, 2005, the Company entered into an agreement with a foundry to reserve and secure foundry fabrication capacity for a fixed number of wafers at agreed upon prices for a period of five and a half years beginning on October 1, 2005. In return, the Company agreed to pay the foundry $174.2 million over a period of 18 months. The amendment extends the term of the agreement and the agreed upon pricing terms until December 31, 2015. As of November 1, 2008, payments totaling $174.2 million, which is included in prepaid expenses and other current assets and other non-current assets have been made and approximately $146.2 million of the prepayment has been utilized as of November 1, 2008. At November 1, 2008, there were no outstanding commitments under the agreement.
As of November 1, 2008, the Company had approximately $58.1 million of other outstanding non-cancellable purchase orders for capital purchase obligations.
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