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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.     )

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        (as permitted by Rule 14a-6(e)(2))

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¨    Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12

ADVANCED MICRO DEVICES, INC.

(Name of Registrant as Specified In Its Certificate)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Notes:

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ADVANCED MICRO DEVICES, INC.

ONE AMD PLACE

P.O. BOX 3453

SUNNYVALE, CALIFORNIA 94088-3453

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

We will hold a Special Meeting of Stockholders of Advanced Micro Devices, Inc. at the Hilton Austin Airport Hotel, 9515 Hotel Drive, Austin, Texas, on July 16, 2007. The meeting will start at 9:00 a.m. local time. At the meeting, we will ask you to:

By Order of the Board of Directors,

HARRY A. WOLIN

Corporate Secretary

This proxy statement and accompanying proxy card are first being distributed on or about June 4, 2007.

YOUR VOTE IS IMPORTANT.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO VOTE

ONLINE AT PROXYVOTE.COM OR COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. RETURNING YOUR PROXY CARD WILL ENSURE THAT YOUR VOTE IS COUNTED IF YOU LATER DECIDE

NOT TO ATTEND THE MEETING.

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ADVANCED MICRO DEVICES, INC.

PROXY STATEMENT

2007 SPECIAL MEETING OF STOCKHOLDERS

QUESTIONS AND ANSWERS

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ITEM 1—APPROVAL OF AN AMENDMENT TO THE 2000 EMPLOYEE STOCK PURCHASE PLAN

In 2000, our Board of Directors adopted the 2000 Employee Stock Purchase Plan (ESPP) effective February 1, 2001, authorizing 500,000 shares of our common stock to be issued to employees under the ESPP. The ESPP was approved by the stockholders at the 2000 Annual Meeting of Stockholders. In 2001, our stockholders approved an amendment to increase the total number of shares authorized to be issued under the ESPP from 500,000 to 7,500,000 and to include part-time employees and employees with less than five months of service as eligible participants under the ESPP. In 2003, our stockholders approved an amendment to increase the total number authorized to be issued under the ESPP from 7,500,000 to 14,500,000 shares. As of May 25, 2007, there were approximately 1,944,924 shares of AMD common stock remaining available for issuance under the ESPP. Our stockholders are being asked to approve an amendment to the ESPP to increase the total number of shares authorized to be issued under the ESPP from 17,500,000 shares to 25,500,000 shares.

Summary Description of the ESPP

Purpose.    The purpose of the ESPP is to provide our employees (including officers) and employees of our participating subsidiaries with an opportunity to purchase our common stock through payroll deductions. The Board of Directors believes that equity participation in the ESPP provides employees at all levels with a greater incentive to contribute to our success.

Administration.    The ESPP is administered by a committee appointed by the Board. Offerings under the ESPP have a duration of three months and commence on the first business day on or after February 1, May 1, August 1 and November 1 of each year, unless otherwise specified by the Board of Directors.

Eligibility and Participation.    Generally, any employee, including those who are customarily employed for less than 20 hours per week and less than five months per calendar year by us or our participating subsidiaries, is eligible to participate in the ESPP. Employees become participants in the ESPP by delivering to us a subscription agreement within a specified period of time before the commencement of each offering period.

No employee is entitled to purchase more than $25,000 worth of shares under the ESPP in any calendar year based on the fair market value of the shares at the time the option is granted. In addition, any option granted to an employee is limited so that immediately after the grant, no employee would own 5% or more of the total combined voting power or value of all classes of shares of our stock or our subsidiaries’ stock.

We estimate approximately 15,252 of our current employees are eligible to participate in the ESPP. We are not presently able to determine the amount of benefits which may be received by employees under the ESPP.

Payroll Deductions.    The purchase price of the shares are accumulated by payroll deductions over each offering period. The deductions may not be greater than 20% of a participant’s compensation, nor less than a minimum established by the Board of Directors or its delegate. Compensation, for purposes of the ESPP, includes salary, shift differential and lead pay, but excludes bonuses, special awards, 50% of certain commissions, overtime, income attributable to option exercises, reimbursements and allowances. A participant may increase or decrease his/her rate of payroll deductions once during each offering period.

All payroll deductions or contributions of a participant will be credited to his/her account under the ESPP and become our general funds. These funds may be used for any corporate purpose. No charges for administrative or other costs may be made by us against the payroll deductions or contributions.

Purchase price.    The price at which shares are sold under the ESPP is the lower of 85% of the fair market value of one share of our common stock at the beginning of the offering period or 85% of the fair market value of one share of our common stock as of the end of such period.

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Number of shares.    The ESPP authorizes a total of 25,500,000 shares of our common stock for issuance under the ESPP, subject to stockholder approval. The market value of our common stock on the New York Stock Exchange as of May 25, 2007 was $14.76 per share.

Withdrawal from the ESPP.    A participant may terminate his/her interest in a given offering by withdrawing all of the accumulated payroll deductions credited to the participant’s account five business days before the end of the offering period. The withdrawal of accumulated payroll deductions or contributions automatically terminates the employee’s interest in that offering. As soon as practicable after withdrawal, the payroll deductions credited to a participant’s account are returned to the participant without interest. A participant’s withdrawal from an offering does not have any effect upon the participant’s eligibility to participate in subsequent offerings under the ESPP.

Termination of Employment.    Termination of a participant’s employment for any reason, including retirement or death, cancels his or her participation in the ESPP immediately. In such event, the payroll deductions or contributions credited to the participant’s account will be returned to the participant, or in the case of death, to the person or persons entitled thereto, without interest.

Changes in Capitalization.    In the event of any stock dividend, stock split, spin-off, recapitalization, merger, consolidation, exchange of shares or other change in capitalization, the number of shares then subject to an option and the number of authorized shares remaining available to be sold shall be increased or decreased appropriately, with other adjustments as may be deemed necessary or equitable by the Board of Directors, including adjustments to the price per share.

Transferability.    No rights or accumulated payroll deductions of an employee under the ESPP may be pledged, assigned or transferred for any reason, and any attempt to do so may be treated by us as an election to withdraw from the ESPP.

Amendment and Termination of the Plan.    The Board of Directors may at any time amend or terminate the ESPP, except that termination cannot affect options previously granted nor may any amendment make any change in an existing option which adversely affects the rights of any participant without the participant’s consent. No amendment may be made to the ESPP without prior or subsequent stockholder approval, if stockholder approval would be required to meet the requirements of Section 423 of the Internal Revenue Code or to satisfy the requirements of a stock exchange on which our shares are listed.

United States Federal Income Tax Consequences.    The ESPP, and the right of participants to make purchases thereunder, is intended to qualify as an “employee stock purchase plan” in the United States under the provisions of Section 423 of the Code. This section describes only the United States federal tax consequences of the ESPP. Under Section 423 of the Code, no income will be taxable to a U.S. participant at the time of grant of the option or purchase of shares. We will be entitled to a deduction for amounts taxed as ordinary income to a U.S. participant only to the extent that ordinary income must be reported upon disposition of shares by the U.S. participant before the expiration of the holding period described below. A U.S. participant may become liable for tax upon disposition of the shares acquired, as summarized below.

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Your Board of Directors unanimously recommends that you vote “FOR” approval of the amendment to the ESPP. Unless you indicate otherwise, your proxy will vote “FOR” approval.

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DIRECTORS’ COMPENSATION AND BENEFITS

In 2006, we paid each director who was not an employee of AMD an annual retainer of $65,000. In addition, in 2006, we paid the Chair of the Audit Committee and the lead independent director an annual fee of $20,000, and the Chairs of the Compensation and Finance Committees an annual fee of $10,000 for service in these capacities. When the Board or a Committee has met more than eight times, we pay an attendance fee of $2,000 for additional Board meetings and $1,200 for additional Committee meetings. In 2006, we supplied a printer to Mr. Claflin to assist him in printing Board materials. We also reimbursed reasonable out-of-pocket expenses incurred by directors in connection with attending meetings and performing other Board-related services for AMD. On two occasions, we paid the travel expenses of their spouses/guests and also provided certain souvenir items for the directors and their spouses/guests in connection with the Board and Committee meetings held in Dresden, Germany in October 2006, as reflected in the chart below.

Also in 2006, under a formula contained in a policy adopted by the Board of Directors, we granted initial options to purchase 50,000 shares of common stock to non-employee directors on their first election to the Board. These initial options were granted in four installments during the initial year of service of 12,500 shares each, of which 4,166 shares vest on the first anniversary of the first installment of the grant, with the balance vesting monthly over the next two years. If the director remained on the Board, we automatically granted annual supplemental options to purchase 25,000 shares of common stock on each re-election. These annual options were granted in four installments each year of 6,250 shares each and vest 2,083 shares on the anniversary of the grant of the first installment, with the balance vesting monthly over the next two years.

The exercise price of each option is the fair market value of our common stock on the date of grant. The options expire on the earlier of ten years from the grant date or 12 months (for options granted before April 26, 2001) or 24 months (for options granted after April 26, 2001) following termination of a director’s service on the Board.

Effective May 3, 2007, our written director equity compensation policy was revised so that, beginning with the 2007 annual meeting of our stockholders, except as provided below, non-employee directors’ initial and annual equity awards will be made in the form of restricted stock units instead of stock options. At each annual meeting of our stockholders, provided he or she has served on the Board for at least six months before the meeting, each non-employee director shall be granted restricted stock units having a value equal to $225,000 divided by the trailing average closing trading prices of our common stock for the 180-day period preceding and ending with the date of the RSU grant, except that the number of restricted stock units is limited so that in no event will each annual grant be for greater than 125%, or less than 75% of, the prior years’ number of restricted stock units granted. New non-employee directors appointed to the Board other than at an annual meeting of our stockholders will become entitled to an initial restricted stock unit grant equal to the restricted stock unit grant made to each non-employee director at the immediately preceding annual meeting of our stockholders. The non-employee directors’ restricted stock units vest in one-third installments over three years from the date of grant. In the event of a change of control of AMD, all of his or her equity compensation awards from AMD will become fully vested. In the event of the termination of a non-employee director’s service to the Board as a result of death, disability or retirement, all of his or her equity compensation awards from AMD will become fully vested if the non-employee director has served as a member of the Board for at least three years prior to the date of termination and has satisfied the Company’s equity ownership guidelines during his or her service as a Board member. Non-employee directors who were appointed to the Board during the 12 month period before May 5, 2007 will, in addition to receiving the restricted stock unit grants described above, continue to be granted the remaining option installments due to them in accordance with our written policy as in effect before May 3, 2007.

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The following chart shows the cash amounts and the value of other compensation paid to each non-employee director for their service in 2006:

Director Compensation

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PRINCIPAL STOCKHOLDERS

The following table shows each person or entity we know to be the beneficial owner of more than five percent of our common stock as of May 25, 2007.

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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The table below shows the number of shares of our common stock beneficially owned as of May 25, 2007, by our current directors, by each of our executive officers listed in the Summary Compensation Table below (Named Executive Officers) and by all of our current directors and executive officers as of May 25, 2007 as a group. Except as otherwise indicated, each person has sole investment and voting power with respect to the shares shown as beneficially owned. Ownership information is based upon information provided by the individuals.

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EXECUTIVE OFFICERS

The following persons were our executive officers as of May 25, 2007:

Hector de J. Ruiz—Dr. Ruiz, 61, is our Chairman of the Board of Directors and Chief Executive Officer. Dr. Ruiz joined us in January 2000 as President and Chief Operating Officer and became our Chief Executive Officer on April 25, 2002. He was first appointed Chairman of the Board on April 29, 2004. Before joining AMD, Dr. Ruiz served as President of the Semiconductor Products Sector of Motorola, Inc. since 1997. Dr. Ruiz had held various executive positions with Motorola since 1977.

Thomas M. McCoy—Mr. McCoy, 56, is our Executive Vice President, Legal Affairs, and Chief Administrative Officer. From 1998 to December 2003, Mr. McCoy served as our Senior Vice President, General Counsel until his appointment as Chief Administrative Officer. Mr. McCoy also served as our Secretary from 1995 until April 2003. Before his appointment as Senior Vice President, Mr. McCoy held the office of Vice President, General Counsel from 1995 to 1998. Before joining us, Mr. McCoy was with the law firm of O’Melveny and Myers where he practiced law, first as an associate and then as a partner, from 1977 to 1995.

Derrick R. Meyer—Mr. Meyer, 45, is our President and Chief Operating Officer. Mr. Meyer joined AMD in 1995 and was Vice President of Engineering for the Computation Products Group before being promoted to Group Vice President, Computation Products Group, in 2001. In April 2002, Mr. Meyer became an executive officer of AMD and was promoted to Senior Vice President, Computation Products Group. Mr. Meyer became our Executive Vice President, Computation Products Group in 2004 and was named President and Chief Operating Officer of the Microprocessor Solutions Sector in April 2005. He was promoted to his current role in January 2006. Before joining us, Mr. Meyer was employed by Digital Equipment Corporation beginning in 1986 and by Intel Corporation from 1983 to 1986.

David E. Orton—Mr. Orton, 51, is our Executive Vice President, Visual and Media Businesses. Prior to joining AMD, Mr. Orton served as the President and Chief Executive Officer of ATI Technologies Inc. (ATI) from June 2004 until AMD’s acquisition of ATI in October 2006. From April 2000 until June 2004, Mr. Orton was the President and Chief Operating Officer of ATI. Before ATI, Mr. Orton served as the President and Chief Executive Officer of ArtX, Inc. Mr. Orton held a number of senior management positions at Silicon Graphics, Inc., including Senior Vice President and General Manager, Visual Computing, and Senior Vice President and General Manager, Scalable Systems.

Henri P. Richard—Mr. Richard, 49, is our Executive Vice President, Chief Sales and Marketing Officer. Mr. Richard joined AMD in April 2002 as Group Vice President, Worldwide Sales. He was promoted to Senior Vice President in May 2003 and became an executive officer in February 2004. Before joining us, he was Executive Vice President of Worldwide Field Operations at WebGain, Inc., a privately held provider of Java software for Fortune 500 companies since September 2000. Before WebGain, Mr. Richard was President of the Computer Products Group at Bell Microproducts from April 2000 to August 2000 and Vice President, Worldwide Sales and Support for IBM’s Technology Group from December 1997 to April 2000.

Mario A. Rivas—Mr. Rivas, 52, is our Executive Vice President, Computing Products Group. Mr. Rivas joined AMD in September 2005 as Corporate Vice President, Office of Strategy Management. He was promoted to Executive Vice President and became an executive officer in December 2006. Prior to joining AMD, Mr. Rivas was Executive Vice President of Operations and member of the Executive Board of Philips Semiconductor from May 2001. During his tenure at Philips, he managed operations (foundries), assembly and testing, supply chain management, information technology and Philips’ communication business. He also served as a Director of Taiwan Semiconductors Manufacturing Corporation (TSMC). Before Philips, Mr. Rivas spent 19 years at Motorola, Inc., with responsibilities in both the semiconductor and communication sectors.

Robert J. Rivet—Mr. Rivet, 52, is our Executive Vice President and Chief Financial Officer. Mr. Rivet joined us in September 2000. Before joining us, he had served as Senior Vice President and Director of Finance

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of the Semiconductor Products Sector of Motorola since 1997. Mr. Rivet served in a number of positions in semiconductor operations at Motorola since 1981, after joining the company in 1976 as a senior financial analyst and senior accountant.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2006 with respect to shares of our common stock that may be issued under our existing equity compensation plans. Our 2004 Equity Incentive Plan, which was approved by our stockholders, is our only equity incentive plan available for the grant of new equity awards. The outstanding options and any full value awards are not transferable for consideration.

Equity Compensation Plan Information

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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee

The Compensation Committee of the Board of Directors is composed entirely of directors who are not employees of the Company and who are independent within the meaning of the listing requirements of the NYSE.

It is the Committee’s responsibility to review and approve:

In addition, the Committee reviews and recommends to the Board:

The Committee’s compensation decisions are based on the following factors:

The Committee formulates an annual agenda for its activities and reviews it periodically. The agenda is designed to cover necessary regular approvals as well as special topics. As part of its agenda, the Committee regularly reviews the alignment of the Company’s compensation programs with the strategy and needs of the business, market trends, and changes in competitive practices.

The Committee has retained Mercer Human Resource Consulting (Mercer) as its consultant in order to have access to objective, expert perspectives on matters related to executive compensation. Mercer was selected as the consultant to the Committee in 2004 after an interview process with executive compensation consulting firms. In 2006, Mercer advised the Committee on a variety of compensation-related issues, including compensation

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strategy, plan design, executive and Board member compensation levels, and preparation of the Compensation Disclosure and Analysis report included in our proxy for the 2007 Annual Stockholders Meeting. In assisting the Committee, Mercer provides input on the Compensation Committee agenda, provides compensation data and attends each meeting, as necessary, to provide opinions on the Company’s executive compensation issues. While the Committee considers input from Mercer, the decisions made by the Committee reflect many factors and considerations. The Company’s human resources department works with Mercer on a regular basis on behalf of the Committee. AMD also retained Mercer for work unrelated to Committee work in 2006, and the total fees paid to Mercer by AMD for this work was reviewed by the Committee. The Committee concluded that the fees paid by AMD to Mercer were not likely to prevent Mercer from being objective in its work for the Committee.

The Compensation Committee Charter includes an overview of the membership, purpose, goals and responsibilities, structure and operations of the Committee, and is available at www.amd.com or by contacting AMD’s Corporate Secretary. Information contained on the AMD website is not incorporated by reference in, or considered to be a part of, this document.

Compensation Philosophy, Principles and Policies

The Compensation Committee oversees AMD’s executive compensation program under a compensation philosophy. The compensation philosophy is to provide compensation and benefit programs that enable AMD to attract, retain and motivate high caliber employees, provide significant opportunity to reward individual and company performance and to support career development and succession goals.

To implement this philosophy, senior management of the Company, including the Chief Executive Officer and senior leaders in the human resources department, and the Committee have established the following principles to guide the design and operation of the Company’s executive compensation program:

AMD’s compensation program is comprised of the following components for Officers:

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In designing and implementing the above listed components of pay, AMD utilizes several policies to guide specific compensation decisions:

Competitive Market Assessments: The Committee annually reviews market compensation levels to determine whether total compensation for its Officers remains in the targeted median pay range and makes adjustments when needed. This assessment includes evaluation of base salary, annual incentive opportunities, and long-term incentives against a peer group of high-technology companies described below and against published data on compensation in the high-technology industry as detailed in the Towers Perrin CDB Executive Compensation Database. In addition, rewards such as health benefits and the 401(k) retirement program and perquisites are regularly assessed relative to the market. The Committee also reviews competitive performance at its peers to establish performance targets for incentive plans and to assess appropriate payout levels for performance (please see the details outlined in the section, Compensation Components, below).

Peer Groups: The Committee uses separate peer groups for benchmarking pay and performance. Ongoing consolidation in the semiconductor industry and the specificity of AMD’s core business have decreased the number of direct AMD peers and limited the talent pool for key positions. As such, AMD needs to compete for talent with a broader range of companies. For comparison of compensation of the Named Executive Officers, the Committee selected a group of large high technology companies with revenues in excess of $1 billion, leveraging the technology subset of the “Mercer 350” published annually in The Wall Street Journal. In 2006, the pay peer group included: Intel Corp., Motorola Inc., Cisco Systems Inc., Apple Computer Inc., Xerox Corp., Texas Instruments Inc., Sun Microsystems Inc., EMC Corp., Lucent Technologies Inc., NCR Corp., Qualcomm Inc., Freescale Semiconductor Inc., Unisys Corp., Avaya Inc., Micron Technology Inc., Affiliated Computer Services, Agilent Technologies Inc., Western Digital Corp., Rockwell Collins Inc., Analog Devices Inc., and National Semiconductor Corp.

In developing a peer group for evaluating the Company’s relative performance for the Company’s 2005 Long-Term Incentive Plan (further detailed under Compensation Components—Long-Term Incentive Compensation, below), the Committee approved the use of a smaller group of direct semiconductor competitors. This peer group includes companies AMD competes with directly for market share. In 2006, the LTIP performance peer group included: Intel Corp., Texas Instruments Inc., STMicroelectronics, Freescale Semiconductor Inc., National Semiconductor Corp., Agere Systems Inc., LSI Logic Corp., and Cypress Semiconductor Corp.

Due to the Company’s acquisition of ATI Technologies Inc. in October 2006 and changing business dynamics, the Committee approved the use of new pay and LTIP performance groups at the beginning of 2007. The specific design and rationale for each peer group are as follows:

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Market Positioning: The Company establishes competitive compensation levels based on market reviews, and then designs its pay program to focus Officers on meeting Company performance objectives. AMD positions total compensation (base salary, bonus and long-term incentives) for Officers between the 50th and 75th percentiles relative to the comparator group depending on individual and Company performance. For 2006, based on excellent Company performance in fiscal year 2005, total compensation for the Named Executive Officers was set near the 75th percentile of market levels.

Going forward, AMD’s strategy, as supported by the Committee, is to maintain total compensation between the 50th and 75th percentiles of market levels, allowing actual positioning to range based on individual performance. To achieve this result, AMD will target the following market positioning for Officers in order to attract high-caliber talent for critical roles within the Company, provide significant upside opportunity for superior levels of performance and align Officers with stockholder interests through meaningful levels of ownership in AMD:

Pay-for-Performance: The Committee considers targeted market positioning (stated above) for each component of pay when determining Officer pay levels. Through this process, the Committee places emphasis on “at-risk” pay, which is delivered through our annual cash incentive plan and long-term incentive grants. The annual incentive plan links a portion of Officers’ cash compensation to the financial performance of the company. More details of the plan are described below under Compensation Components—Annual Incentive Plan.

It is AMD’s belief that equity compensation, combined with stock ownership guidelines, aligns the perspectives of its Officers with stockholder interests. To that end, the majority of incentive compensation and total compensation in general, is delivered in equity. Prior to 2006, AMD delivered long-term compensation to Officers primarily in the form of stock options. In 2005, after considering the accounting treatment of stock options under FAS 123(R), as well as retention, talent and competitive landscape factors, the Committee approved the regular use of restricted stock units (RSUs) and the introduction of the AMD 2005 Long-Term Incentive Plan. AMD currently uses three forms of long-term incentive compensation for its Officers: stock options (options), RSUs and performance-based RSUs (see the long-term incentive design details below for more of the specific features of each vehicle). The mix of stock options, RSUs and performance-based RSUs focuses Officers on the Company’s share price. Also, using these vehicles puts more compensation at risk for the Officers, and provides for greater rewards if superior performance is generated. The actual mix of these long-term incentives was determined using competitive long-term incentive mixes as applicable for each Officer. When determining the mix between equity and cash compensation, the Committee principally considers market competitive levels, historical AMD practices, AMD’s pay for performance philosophy, Named Executive Officer

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duties and responsibilities, the retentive value of equity compensation delivered and the accounting, tax and dilutive impact of each vehicle. In 2005, Mercer conducted a competitive market assessment that indicated AMD’s long-term incentive levels for Named Executive Officers were below the market median. In order to align long-term incentive levels with competitive market practices, AMD established the 2005 Long-Term Incentive Plan (LTIP) and granted performance based RSUs to each of the Named Executive Officers. The new LTIP further shifted the pay mix toward equity incentives, with 100% of long-term incentives and a majority of total compensation for the Named Executive Officers delivered in equity.

Other Factors Affecting Compensation: In establishing total compensation for the CEO and the Named Executive Officers, the Committee considers the effect of Section 162(m) of the Internal Revenue Code, which limits the deductibility of compensation that is not performance-based paid to each Named Executive Officer to $1 million. While the Committee will consider deductibility under Section 162(m) with respect to future compensation arrangements of these Officers, deductibility will not be the sole factor used in setting the appropriate levels or modes of compensation. Since corporate objectives may not always be consistent with the requirements for full deductibility, certain compensation paid by AMD in the future may not be fully deductible under Section 162(m).

In addition, in 2006 and 2007, the Committee evaluated the Company’s executive compensation policies and program with regard to, among other things, market competitive practices, accounting and economic costs, the incentive and motivational value of various compensation vehicles, accumulated equity holdings and past earnings for each Officer, company performance, and the need to retain key talent.

Compensation Components

To provide a competitive overall compensation and benefits package that is tied to creating stockholder value and supports the execution of the Company’s business strategies, AMD’s executive compensation program is comprised of several components. The combination and allocation of the components and the amount of each component is influenced by the role of the Officer in the Company, market practices, the total value of all the compensation, benefits and perquisites available to the person, past earnings and the employment contract with the CEO. The Committee reviewed and considered each component for each Officer before making compensation decisions. In accordance with the Committee’s compensation philosophy, a majority of the total compensation paid to Officers is comprised of incentive compensation that is “at-risk.” The specific rationale, design, reward process, and related information regarding the components of compensation are outlined below.

Base Salary

Salaries are provided to Officers as compensation for day-to-day responsibilities and services to the Company and to meet the objective of attracting and retaining the talent needed to run the business. Salaries provide a consistent cash flow to employees assuming acceptable levels of performance and ongoing employment. The decision to increase Officer salaries is based on an analysis of competitive salary levels within the Company’s pay peer group, overall company budgets, individual performance, experience and potential. The Committee annually reviews Officer performance and market compensation levels in order to determine an appropriate level of base salary for the year. In addition, the Committee considers the input of the CEO in determining appropriate base salary increases for non-CEO Officers. In 2006, the CEO’s base salary was approximately at the 75th percentile salary level for CEOs of companies in the pay peer group. Base salaries for the other Officers were between the 50th and 75th percentile of market levels with variation given by experience, performance and impact on Company performance. A significant percentage of total compensation for Officers was at risk, in the forms of annual and long-term incentive compensation.

Annual Incentive Plan (AIP)

The Annual Incentive Plan is a cash-based incentive plan designed to focus Officers and other participants on generating strong Company financial performance.

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AIP Performance Measure & Plan Mechanics: In 2006, the AIP was funded based on the Company’s Operating Income performance. The use of this measure is intended to focus participants on generating profitability, both through maximizing revenues and controlling costs. The performance targets under the AIP are set at levels that the Committee believes may be achieved, but which will require strong performance from each plan participant in order to receive bonus payouts under the AIP.

AIP Funding: AIP performance targets are set for 6-month performance periods. Goals are established at the beginning of each performance period. For each period a threshold, target and maximum goal is established that represents 25%, 100% and 300% of target funding levels in order to provide significant upside for superior levels of profitability. The threshold and maximum funding levels are consistent with the levels of “at-risk” pay among companies with similar pay-for-performance philosophies, and the maximum performance goal is set to reflect a high performance standard. The level of Operating Income performance necessary for funding the threshold, target and maximum levels is set by the Committee with input from Company management for the 6-month time periods, with any payment made after the end of the fiscal year. The Committee has discretion to adjust performance targets for extraordinary items as necessary, to ensure the Committee’s intent is consistent with actual Company performance. The goals are established using a variety of factors, including internal budgets, strategic objectives, market conditions and stretch performance goals.

AIP Target Opportunities: Each eligible position in the Company, including Officers, is assigned a target bonus opportunity reflecting competitive practices in the market for similar positions. Target bonus opportunities are generally positioned at the median of the competitive market. Targets for the Named Executive Officers range from 100% to 150% of base pay. Payment of target bonus amounts is not guaranteed, but must be earned based on the AIP funding and allocation process described above. The target set for the CEO and the Named Executive Officers was based on competitive market practices and designed to focus the Named Executive Officers on the goal of improved operating performance. The CEO’s target bonus is 150% of his base salary. The targets for the other Named Executive Officers were set at 125% of base salary for Mr. Meyer and 100% of base salary for Messrs Richard, Rivet and McCoy. For 2006, each of the named executive officers, including the CEO, received 58% of their respective target bonuses. The CEO’s bonus was awarded based on the Compensation Committee’s overall assessment of Dr. Ruiz’ performance. The overall bonus payout for the executive officers was determined by the 2006 first and second half performance results, weighted equally. In the first half of 2006, AMD performed at 1.25x target, however the Committee used downward discretion to fund this half of the bonus at 0.90x target because the Company did not achieve specified internal targets. In the second half of 2006, AMD performed under threshold. The Committee used its discretion to fund the second half portion of the bonus at 0.25x target since the primary reason for being under threshold was the strategic defense of the Company’s market share against competitive assault. This portion of the bonus will not be deductible under 162m legislation.

Recommendations for bonus payments to non-CEO Officers are made to the Committee by the Chief Executive Officer. The Committee uses its discretion to determine each individual Officer’s bonus.

AIP Payment Process: For Officers, the AIP is paid with one annual payout based on performance in each 6-month period. Annually, the Committee approves a bonus of 0x-4x the target award for each Officer, based on Company and individual performance against the pre-determined goals. Under the plan, the Committee is allowed full discretion to reduce the amount of any award prior to payment as a result of the participant’s performance during the award period.

Long-Term Incentive Compensation

In order to ensure a strong link to the long-term interests of stockholders, AMD places significant emphasis on long-term incentive compensation, particularly in the form of equity. In determining the value of long-term incentive compensation for Named Executive Officers, the Committee targeted the 50th—75th percentile of the pay peer group.

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To fund long-term compensation programs, the Committee reviews and provides guidance around an equity pool available for awards in any given year at the median level of competitive market practices. For 2006, the Committee targeted a total annual share dilution rate of 2.5%. For 2007, the Committee has approved a total target annual share dilution rate of 3%. The Committee believes that this dilution rate is necessary to provide competitive equity grants, particularly in light of the increased employee population as a result of the acquisition of ATI Technologies Inc. This dilution rate is also within competitive norms.

Stock Options and Restricted Stock Units: As part of the overall compensation structure, each Named Executive Officer has been assigned an annual share-based guideline of stock option equivalents. Before 2005, the award was delivered solely in options. Beginning in 2005, the Committee added RSUs to the program, and each Officer’s annual equity is now awarded 50% in stock options and 50% in RSUs at a 2.5-to-1 option-to-RSU ratio. For Mr. Meyer and Mr. Richard, the equity grant is more heavily weighted toward RSUs due to Mr. Meyer’s promotion and role-specific retention issues for Mr. Richard. In 2006, the stock-option equivalents were granted in four separate installments throughout the year where each installment included a grant of options and RSUs. The four-installment grant of stock incentives allows the awards to be priced throughout the year, thereby limiting volatility in cost to the Company and in opportunity to the Officer from year to year. In 2006, each installment was granted on a pre-determined date corresponding with the dates of regularly-scheduled Compensation Committee meetings, which were established in 2005. Going forward, AMD intends to grant equity awards on the 15th of the month following pre-determined dates of Compensation Committee meetings. The 2007 meeting schedule has already been determined.

Stock options are granted with per-share exercise prices no less than 100% of the fair market value of AMD’s stock on the date of grant to ensure that Officers will receive a benefit only if and when the stock price increases. One-third of each 2006 option grant vests on the first anniversary of the first installment of the grant and the remainder vest monthly over two years thereafter. The options, if not exercised, expire in a maximum of seven years. The intent of the stock option grants is to directly link any gain to that of stockholders, and provide a strong linkage of pay to company performance. Beginning May 15, 2007, stock options will continue to be granted in four separate installments throughout the year, but the vesting will be changed to one-third of each grant will vest on the first anniversary of the first installment of the grant and the remainder will vest quarterly over two years thereafter.

One-quarter of each 2006 RSU grant vests following the first anniversary of the first installment of the grant and the remainder vest quarterly over three years thereafter. RSUs are payable to the employee in shares of AMD common stock upon vesting. The intent of RSU grants is to recognize individual performance, encourage employee retention and manage dilution, while aligning the potential value of the award to the overall AMD market value. Beginning May 15, 2007, AMD intends to grant RSUs in one installment. One-third of each grant will vest between one to 1.25 years from date of grant and the remainder will vest annually over two years thereafter.

In 2006, stock option equivalents for the Named Executive Officers were determined based on our compensation philosophy and were as follows:

In 2007, stock option equivalents for the Named Executive Officers were determined based on our compensation philosophy and were as follows:

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Performance-Based Restricted Stock Units: Under the AMD 2005 Long-Term Incentive Plan (LTIP) AMD grants performance-based RSUs to Officers to focus them on long-term, competitive operating excellence, and the creation of economic and stockholder value. Performance is measured over a three-year period by comparison to the performance peer group. The amount of the performance-based RSUs to be granted at the beginning of the performance period are determined in February of each year at the regular meeting of the Compensation Committee of the Board. Based on the financial results of the Company, the number of performance-based RSUs earned (paid out) is determined at the end of a three-year period. Payouts may vary from 0x-2x of target payouts, depending on Company performance in relative revenue growth and profitability.

Relative revenue growth is measured at the end of the performance cycle by assessing the Company’s compounded annual revenue growth over the three-year period against the compounded annual aggregate revenue growth of the performance peer group. In addition, to ensure focus on overall profitability, the payout is adjusted based on the Company’s average operating income margin over the three-year performance cycle. The performance targets under the LTIP are set at levels that the Committee believes may be achieved, but which will require strong performance from each plan participant in order to receive payouts under the RSUs granted pursuant to the LTIP.

The following table shows the number of RSUs that may become vested at certain performance levels with respect to each of the Named Executive Officers:

Number of RSUs for Various Levels of Performance: 2006-2008 Cycle

Number of RSUs for Various Levels of Performance: 2007-2009 Cycle

The first cycle of the 2005 LTIP consisted of a two-year transition period ending in 2006. Based on actual two-year cumulative performance, Named Executive Officers received payouts of 2x target awards. Individual payouts were as follows:

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Cash Long-Term Incentive Plan: Prior to the Committee’s approval of the LTIP, AMD granted cash-based long-term incentive grants under the Vice-President Long-Term Incentive Plan (VP LTIP). Under the CEO’s employment agreement, the CEO was eligible for an annual target cash award opportunity of 200% of salary. For this cycle, the CEO received a pro-rata portion of the award opportunity based on his 27 months of participation out of the 36 month performance period. The annual target opportunity for other VP-level employees and above was 30% of salary. Maximum opportunity for all participants, including the CEO, was 2x the target award. The cash award was paid at the end of a three-year period based on the Company’s return-on-equity (ROE) performance against the S&P 500 and sales growth performance against other companies in the semiconductor industry, as published by the Worldwide Semiconductor Trade Statistics. Grants are no longer made under the VP LTIP and the plan’s final performance period ended in 2006. Payouts were based strictly on the financial results of the performance cycle as set at the beginning of the cycle. Payouts to the Named Executive Officers in 2006 were as follows:

After reviewing market-competitive compensation levels, the Committee will determine a target long-term incentive grant value for each Named Executive Officer. Based on this value, the Committee will approve the number of shares to be delivered to each Named Executive Officer during the year.

Other Benefits

AMD offers additional benefits designed to be competitive with overall market practices, and to attract and retain the talent needed in the Company. All United States salaried employees, including Officers, are eligible to participate in AMD’s Section 401(k) plan (which includes Company matching contributions), health care coverage, life insurance, disability, paid time-off and paid holidays. In addition, Officers are eligible to receive certain other benefits described below.

Deferred Compensation: In addition to participation in AMD’s Section 401(k) plan, Officers are eligible to participate in a nonqualified deferred compensation program, the “Executive Investment Account Plan.” The plan allows deferral of up to 50% of salary and up to 100% of bonus into selected funds and is intended to assist Officers in their retirement planning. The plan also provides company ‘restoration’ contributions, intended to restore company contributions lost due to IRS limits on the tax-qualified Section 401(k) plan. Earnings on deferrals are based on the performance of the funds selected by participants. Contributions for 2006 and year-end account balances for those Officers can be found in the Nonqualified Deferred Compensation table.

Nonqualified Defined Benefit Arrangements for CEO and CFO: Pursuant to his employment agreement, Dr. Ruiz receives benefits that are intended to replace former employer benefits that were forfeited upon joining AMD. Dr. Ruiz will receive:

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Given these benefits, Dr. Ruiz’ projected level of total retirement benefits is competitive with levels among AMD’s pay peer group. Details of the CEO’s benefits and the amounts accrued are found in the Pension Benefits table.

Mr. Rivet will receive a lump sum retirement benefit that is intended to replace former employer benefits that were forfeited upon joining AMD. The lump sum payment will be determined by discounting to present value on the date of determination a stream of lifetime payments equal to no more than 70 percent of his base salary then in effect, and then deducting from that present value the value of certain other retirement payments from us and his former employer.

Mr. Rivet’s projected level of total retirement benefits is competitive with levels among peer group companies. Details of Mr. Rivet’s benefits and the amounts accrued are found in the Pension Benefits table.

Employee Stock Purchase Plan: In order to provide employees at all levels with greater incentive to contribute to our success, the Company provides employees, including Officers, with the opportunity to purchase discounted AMD common stock under an Employee Stock Purchase Plan, qualified under Section 423 of the Internal Revenue Code. The offerings commence on the first business day on or after February 1, May 1, August 1 and November 1 of each year, unless otherwise specified by the Board of Directors, for a duration of three months. The price at which the shares are sold is the lower of 85% of the fair market value of one share of common stock at either the beginning or end of each 3-month period. The price of the total number of shares is accumulated by payroll deductions over each offering period. Each employee’s total purchases in any year can not exceed $25,000 in value or 20% of the total of his/her salary, whichever is less.

Additional Benefits: The Company also provides a limited number of personal benefits to the Named Executive Officers in order recognize the management team’s performance and to be competitive with overall market practices. These benefits are as follows:

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Supplementary Compensation Policies

AMD uses several additional policies to ensure that its executive compensation program is responsive to stockholder interests and competitive with the market. Specific policies include:

Stock Ownership Guidelines

In May 2004, AMD established stock ownership guidelines for its Named Executive Officers. Each Named Executive Officer is required to acquire, within five years of the establishment of stock ownership requirements or of becoming an Officer, 50% of the Officer’s annual stock-option equivalent grant in shares of common stock. The ownership guideline may be satisfied only by direct ownership of common shares. The Company has a stock trading policy that prohibits Named Executive Officers from short sales and buying or selling puts or calls. Although hedging transactions are not expressly prohibited, any hedging must be accomplished in compliance with the stock trading policy. As of the end of 2006, the CEO was in compliance with the ownership guideline. The other Named Executive Officers were on target to meet their ownership guideline within the appropriate timeframe.

Severance Agreements

Pursuant to his employment agreement, the Company has a severance arrangement with Dr. Ruiz. Under the agreement, Dr. Ruiz receives certain severance benefits upon termination unless the termination is for cause or is a voluntary termination without good reason. For a detailed description of Dr. Ruiz’ severance benefits, please see the “Employment Agreements” section, below.

Pursuant to an individual agreement, Mr. Rivet receives full vesting of his accrued retirement benefit upon the earlier of: (1) age 55; (2) termination of employment following a change in control; and (3) termination other than for cause, after age 54. This benefit is intended to serve as a partial replacement for Mr. Rivet’s arrangement with his former employer.

Under the Company’s 2005 Long-Term Incentive Plan, a prorated performance-adjusted payment is paid to Officers upon termination at the discretion of the Committee.

Named Executive Officers will receive certain incremental amounts in the event of termination of employment in connection with a change in control of the Company, as described in the “Change in Control Arrangements” section, below.

The Company is under no contractual obligations with respect to severance with any of the other Officers other than those described above.

Employment Agreement

AMD entered into an employment agreement with Dr. Ruiz in order to provide the Company with stability in its leadership. Pursuant to the agreement, Dr. Ruiz became the Company’s President and Chief Executive Officer on April 26, 2002. The agreement provides for his tenure as Chief Executive Officer through April 26, 2007, subject to automatic renewal for one-year periods unless we notify Dr. Ruiz that we will not renew (i.e., notice of non-renewal). The Board of Directors has affirmatively determined not to give Dr. Ruiz notice of non-renewal, thereby renewing his agreement for one full year, through April 26, 2008. The agreement was amended effective January 1, 2005, following his appointment as Chairman in April 2004. The agreement provided for an annual base salary of $950,000, subject to increases at the discretion of the Compensation Committee. The Committee exercised its discretion in May 2006 and May 2007 and increased Dr. Ruiz’ annual salary to $1,124,000. The employment agreement is described in detail in the section entitled, “Employment Agreements,” below.

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Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this proxy statement, in whole or in part, the following report will not be incorporated by reference into any such filings, nor will it be deemed to be soliciting material or deemed filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement for this special meeting of stockholders.

COMPENSATION COMMITTEE

Bruce L. Claflin, Chair

Robert B. Palmer

Morton L. Topfer

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EXECUTIVE COMPENSATION

The following table shows compensation information for our Chief Executive Officer, our Chief Financial Officer, and our three other most highly paid executive officers as of the end of December 31, 2006, our last fiscal year (our Named Executive Officers).

SUMMARY COMPENSATION TABLE 2006

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Nonqualified Deferred Compensation

AMD maintains a non-qualified deferred compensation plan, the Executive Investment Account Plan, which allows eligible employees, including Officers, to voluntarily defer receipt of a portion of his/her salary and annual bonus until the date or dates selected by the participant. The following table shows certain information for the Named Executive Officers under the Executive Investment Account Plan.

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Outstanding Equity Awards at Fiscal Year-End

The following table shows all outstanding equity awards held by the Named Executive Officers as of December 31, 2006, the end of the 2006 fiscal year. The equity granted in 2006 is reported in the following table and in the table entitled, “Grants of Plan-Based Awards,” below.