This summary is based on the second quarter fiscal 2007 earnings call conducted by Advanced Micro Devices, Inc. (AMD: chart) on July 19, 2007.
President, Chief Operating Officer: Dirk R. Meyer
Chief Financial Officer, Executive Vice President: Robert J. Rivet
Chairman of the Board, Chief Executive Officer: Hector de J. Ruiz
Executive Vice President, Chief Sales and Marketing Officer: Henri P. Richard
Investor Relations: Mike Haase
Key Investors Issues
- Realized a net loss of $600 million or $1.09 a share.
- Toshiba chose AMD as a strategic supplier for its new series of Satellite notebook computers.
- The firm announced the initial revenue shipments of the first native x86 quad-core processor, Barcelona.
Second Quarter Fiscal 2007 Financial Highlights
Expanded Business
- Won new business from Toshiba, who selected AMD-based platforms for a new line of satellite notebook PCs.
- Expanded business with existing customers such as Dell who expanded their AMD-based commercial offering with the addition of 10 new PowerEdge servers as well as two new Dell Inspiron desktop systems.
- SUN introduced its new Blade 6000 server built on AMD Opteron processors and HP launched two new AMD Athlon-based Blade PCs.
- In addition, LG Electronics selected the AMD Imageon 2282 media processor to drive their new designer phone.
Product Development
– The Fab 36 conversion to 65-nanometers was completed, with yields exceeding expectations and focus is now on the 45-nanometer.
- The recently launched ATI Radeon HD 2000 CPU family has been well-received by distribution and OEM customers.
- Barcelona, the industry’s first native X86 quad-core processor, will ship this quarter in both standard and low-power versions.
- The next generation Puma Notebook platform design is also generating interest.
The firm realized a net loss of $1.09 per share.
The loss included charges of $99 million, or 18 cents a share, from ATI acquisition related and integration charges of $78 million, employee severance charges for workforce reductions of $16 million and debt issuance charges of $5 million associated with the $500 million loan pay down.
Gross margin increased to 34% excluding ARC, severance charges and stock-based compensation expense.
This was largely driven by increased 65-nanometer microprocessor shipments. However, margins were negatively impacted by an inventory write-down charge of approximately $30 million associated with older generation microprocessor inventory.
Total operating expenses, including R&D and SG&A, were up $73 million from the prior quarter.
Increased costs were driven mainly by engineering supporting new product launches, marketing supporting higher sales in the form of demand generation programs and severance charges. The costs benefits associated with the headcount actions will begin to show up in the third quarter expense line.
Cash balance was $1.6 billion, following the netting of $1.5 billion from the $2.2 billion convertible offering, paying down debt and putting a cap call in place.
- In addition, the firm did not receive any cash for the sale of the 200-millimeter tools, the Spansion investment, or from the sale of administrative land and buildings, represent in excess of $800 million of cash generating opportunities in the future.
- Total inventory was $892 million, down $46 million from the prior quarter.
- Deferred income on shipments to distributors almost halved to $92 million, reflecting the work accomplished with the distribution business.
- Capital expenditures were $414 million.
Performance Analysis of Segments
Computing solutions revenue was $1.098 billion, up 20% from the prior quarter. Microprocessor unit sales increased 38% quarter on quarter.
- Microprocessor ASPs were down, driven by a decline in desktop ASPs and offset by increased ASPs in mobile and server.
- Chipset revenue declined 13% driven by a decline in Intel business offset by increased AMD chipset revenue.
- The segment realized an operating loss of $258 million, 20% less than the prior quarter.
Graphic revenue of $195 million was flat compared to the first quarter.
- Initial sales of the ATI Radeon HD 2000 family of graphic processors were strong in the channel and design win momentum with key mobile and desktop OEMs continues to grow.
- Operating loss was $50 million, up $15 million from the prior quarter.
Consumer electronic revenue was $85 million, down from the previous quarter.
- Handheld sales were significantly lower, offset by increased DTV sales increasing operating loss by $18 million.
