This is a summary of the first quarter fiscal 2006 earnings call conducted by Advanced Micro Devices Inc. (AMD: chart) on April 12, 2006

Management:

- Chairman, CEO Hector Ruiz
- President, COO Derrick Meyer
- EVP, Chief Sales & Marketing OfficerHenri Richard
- CFO Bob Rivet
- Director-IR Mike Haase

Key Investor Issues:

- Sales of $1.33 billion were up 11% compared to the first quarter of 2005..
- Net income was $185 million, or 38 cents per share, from a loss of $17 million or 4 cents a share.
- There was a $500 million equity offering, conversion of the $500 million on a convertible note from debt to equity, and the firm paid down $210 million of the 7 ¾ senior note.

First Quarter Highlights:

Sales of $1.33 billion were up 10.8% compared to $1.2 billion in the prior year with server, mobile and desktop processor sales mix improved, with desktop and mobile ASPs increasing.

- The company established another sales record for the Opteron processor family, driven by increased customer adoption of dual-core processors.
- Client sales were seasonally down, however Turion 64 and Athlon 64 dual-core units and sales increased over the fourth quarter.
- Geographically, processors sales were especially strong in Greater China, Russia, South Asia and Latin America.
- AMD believes that once again it took dollar share across server, mobile and desktop product offerings.

Gross margin was a record 58.5%, up from 57.3% in the fourth quarter of 2005 largely due to product mix improvements, increased ASPs and manufacturing efficiencies.

- Operating income of $259 million in the quarter remained at approximately the same levels as to the prior quarter, and increased significantly from the first quarter of 2005.
- Total operating expenses, which includes R&D and SG&A, were up 3% from the prior quarter, and AMD continues to make progress toward its long-term goals with R&D and SG&A both approximately 19% of sales in the quarter.

Net income was $185 million, or 38 cents per share, from a loss of $17 million or 4 cents a share in 2005 including a non-cash stock-based compensation expense of $15 million or $0.03 per share due to FASB-123.

-It also included an expense of $20 million, or $0.04 per share associated with the redemption of $210 million of senior debt; a 15% effective tax rate and an $18 million loss associated with the company’s 37.9% ownership in Spansion.
- The cash balance increased to $2.6 billion in the quarter, up $800 million compared to the fourth quarter.
- This was due to over $560 million of cash flow from operation, including positive free cash flow of $275 million; a successful $500 million equity offering, which was partially used to pay off $210 million of the senior 7 ¾% debt.
- Inventories were $337 million, and they declined 13% from fourth quarter levels, with days of inventory at 55 days, down six days from the prior quarter.

Second Quarter Fiscal 2006 Outlook:

- AMD expects second quarter sales to be flat to slightly down seasonally from the first quarter of 2006.
- In contrast to the typical 13-week quarters, the second quarter of 2006 will have 14 weeks.
- Operating expenses are expected to increase by approximately 8% quarter on quarter.
- Stock compensation expense is expected to be approximately $20 million at the current share price.
- Depreciation and amortization will be approximately $825 million for the year, with second quarter depreciation increasing by at least 10% from the first quarter.
- AMD is raising the 2006 CapEx forecast to $1.7 billion based on unit demand increases for AMD products.

Key questions and answers from the first quarter fiscal 2006 earnings call conducted by Advanced Micro Devices Inc. (AMD: chart) on April 12, 2006

Joanne Feeney: How did the profit-sharing changed sequentially from the fourth quarter, when we thought it was high, to this quarter?

Bob Rivet: It is about the same. Profit sharing is a function of profits, and since profits were about the same, it is relatively the same number.

Joanne Feeney: So there was no adjustment then of the incentive plans that dictates that payout?

Bob Rivet: Profit-sharing is what we pay to the general employee base. Incentive bonus stuff clearly is a different angle. That is lower than it was in the fourth quarter, based upon new expectations we set for the management team.

Joanne Feeney: Regarding the expenses in R&D and SG&A, you made some investments to beef up the design team, and so your percentage costs of both SG&A and R&D have gone up to around 19%. Is that something we should expect to see maintained at that level, or do you intend to make further investments in the R&D design teams?

Bob Rivet: We will continue to play through our attraction of talent to increase the design teams to work on further customer centric innovation. But we also believe the top line will continue to grow at even a faster rate, so that we will see dilution as time goes on of R&D as a percent of sales.