Key questions and answers from the second quarter fiscal 2007 earnings call conducted by Advanced Micro Devices Inc. on July 19, 2007

Uche Orji (UBS Warburg): Looking at your gross margin guidance, given the strong jump we’ve seen sequentially in the second quarter, how do you expect it to improve next quarter?

Robert J. Rivet: It is due to new products in both the CPU and the GPU world. The 65-nanometer continues to be a higher proportion of what we ship and that includes the GP world, where the R600 type product sells. In addition, we do not expect the inventory write-off we had to happen again.

Uche Orji: On ASP, how are you looking at the pricing data mix into the second-half and if there is any expectation as to what Barcelona could do for ASP?

Henri P. Richard: We had close to 10% decrease in the desktop space but we had growth in the server market so there is competition in the desktop right now and this is a CPU statement.

The value space is an increasing percentage of the total shipments. The second quarter was stable relative to the first quarter price pressure and it is going to continue to be a very competitive environment. We are introducing new products that are better positioned than our existing products in terms of competing and that will afford us some opportunity for at least a stable environment.

Uche Orji: What feedback are you getting in terms of the customer reception of the lower speed version products?

Henri P. Richard: The focus in the data center switched from absolute performance to performance per watt and we were at the forefront of this change and you will see that the performance of Barcelona in its 68-watt version is satisfactory and our customers can’t wait to ship it. We’ll continue to scale up the performance in the various thermal envelopes that this product will be available through the end of the year.

Krishna Shanka (JMP Securities): What are the challenges around the Barcelona performance roadmap and how do you plan to improve that, both from a design iteration and a manufacturing viewpoint?

Dirk R. Meyer: We’re very happy with our 65-nanometer yields across all products, including Barcelona. However, while being an absolutely great product, it is complicated and it’s taking more design work than we anticipated getting the final rim in place.

Krishna Shankar: In terms of manufacturing flexibility and slowing down capital spending, what is the scope of that program and whether the slowdown in Fab 38 hinders your market share goal plans?

Hector de J. Ruiz: Our manufacturing strategy and our aspirations for continuing to gain share over time have not changed either. In the near term, we’ve had an outstanding performer out of Fab 36. The flexibility we have had with charter semiconductor as an additional place to manufacture has given us an opportunity to reduce our capital outlay this year and expand the rate at which we ramp Fab 38.

Doug Freedman (American Technology Research): What are the aspects that are going to help you break even by year end?

Robert J. Rivet: Our goal is to gain market share, particularly in the CPU business through the lineup of new products that have launched or will launch. With new products comes more enhancement of gross margin.

Tim Luke (Lehman Brothers): When do expect to see contributions from Barcelona and Phenom, particularly in the higher end of the high-performance desktop market?

Dirk R. Meyer: We will be shipping the Phenom variance of the new product in Q4 but that’s going to be late enough in Q4 that while there’ll be some contribution to the bottom line, it won’t be substantial.

Tim Luke (Lehman Brothers): How should we think about the trends on the ATI side in the second-half of the year?

Henri P. Richard: The chipset business is a design cycle business and our design is solid. We see a decline because the Intel business is rolling off but we are growing very quickly the AMD-based chipset business. With regard to GPU, we started to ship in volume the HD 2000 series toward the end of the quarter. The initial demand is very strong and the third quarter is where the proof is going to be in terms of how much velocity we are going to get.

Glen Yeung (Citigroup): On SOI as a technology for AMD, is it still important for you at the low-end, given that there is a cost penalty for using SOI at low-end chips?

Dirk R. Meyer: The 45-nanometers is part of our plan and it’s a fine plan for SOI. As we always do, for the 32-nanometer generation we’re evaluating the choice and mix of SOI versus bulk and that work is still in progress.

JoAnne Feeney (Midwest Research): Can you describe your product timing?

Henri P. Richard: What you are seeing is a shift of relevance around the PC platform between the various components that make the user experience and that’s why the acquisition of ATI was so important.