This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Advanced Micro Devices Inc. (AMD: chart) on January 17, 2008.
Executive Vice President, CFO: Robert Rivet
Chairman of the Board, CEO: Hector Ruiz
President, COO: Derrick Meyer
Senior Manager Investor Relations: Ruth Cotter
Key Investors Issues
- The net loss was $3.06 per share as against $1.08 per share in prior year.
- Quarterly revenue surged 8% over the sequential quarter to $1.77 billion.
- The gross margin increased sequentially three percentage points to 44%, driven by increased new product shipments, higher ASPs and cost containment.
Fourth Quarter Fiscal 2008 Financial Highlights
Total AMD revenue was $1.77 billion, up 8% sequentially.
In the fourth quarter, the firm achieved several new records, including record microprocessor unit shipments into the distribution channel, record desktop processor unit shipments and once again record notebook processor unit shipments. The company is seeing growing demand for new product offerings in each of its businesses and in particular for its quad-core processors. The firm shipped close to 400,000 quad core units across its desktop and server products segments, consistent with the guidance.
The firm recorded a net loss of $3.06 per share for the quarter.
In December, the company had disclosed that it would be taking a material charge for the write down of good will and intangible assets associated with the acquisition of ATI. This charge amounted to $2.89 per share or $1.675 billion, of which $1.6 billion was non-cash. The components of this charge are as follows:
- a non-cash goodwill and intangible write down of $1.545 billion, or $2.67 per share associated with the ATI acquisition net of taxes;
- a non-cash charge for other ATI acquisition related costs of $61 million, or 11 cents per share;
- and a cash investment impairment of $69 or 12 cents per share associated with the remaining Spansion holdings.
Fourth quarter gross margin increased sequentially three percentage points to 44%.
This was driven by increased new product shipments, higher ASPs and cost containment. Manufacturing performance in Fab 36 remained strong, exceeding targets for output, yield and cycle time.
Total operating expenses, R&D and SG&A were down $25 million from the prior quarter.
This was lower than projected, as a result of continued strong operational discipline.
- Cash flow from operation was a positive $114 million for the quarter.
- The adjusted EBITDA was a positive at $203 million as compared to $60 million in the prior quarter.
- The cash and marketable security balance at the end of the quarter was $1.9 billion, up $361 million from the third quarter.
- In the quarter, the firm netted $608 million from a strategic investment by Mubadala Development Company.
- Total inventory at the end of the fourth quarter was $821 million, down 4 days to 76.
- Accounts receivables improved DSOs to 33 days, down 5 days from 38.
The firm was determined to fix its Barcelona quad-core issues as soon as it could.
Silicone has been out of the factor with the fixes that the firm has put in place. The firm expects that within two to three weeks, it will begin providing its customers the samples that they will then put in server platforms beginning the end of the quarter and well into the second quarter and beyond. The customers are thrilled about the progress that the firm has made and they’re looking forward to receiving this product.
Performance Analysis of Business Segments
The
computing solutions side was profitable in the fourth quarter. The firm gained share in microprocessors on the basis of it’s 11% growth in revenue. For the segment, revenue was $1.4 billion, up 9% from prior quarter. Microprocessor unit shipments increased 7% sequentially and ASPs grew 4% over the prior quarter. Operating income was $21 million, a $133 million sequential improvement. The segment returned to profitability on the strength of new products, cost containment and gross margin expansion. Demand for quad-core AMD processors is strong. The firm continues to execute its volume ramp and in the first quarter, it will more than double its shipments over the fourth quarter.
In the
graphics segment, revenue was $259 million, up 3% compared to the third quarter. The operating loss in graphics segment was $12 million, compared to a $3 million loss in the prior quarter. Demand for the new ATI Radeon HD3800 and HD2000 GPU families is strong.
