This is a summary of the fourth quarter fiscal 2008 earnings call conducted by Advanced Micro Devices, Inc. (AMD) on January 22, 2009.
Management:
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President and CEO: Dirk Meyer
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Chief Operations and Administrative Officer and CFO: Bob Rivet
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Director of IR: Ruth Cotter
Key Investor Issues:
- The chip giant reported a net loss of $1.42 billion, or $2.34 a share, versus a loss of $1.77 billion, or $3.06 a share, a year earlier.
- Revenue was $1.16 billion, down from $1.74 billion last year.
- Adjusted net loss was $418 million.
- Unit sales and average selling prices of its microprocessors both declined. Total revenue for that business also fell 38% for the year-earlier period.
- The company''s graphics chips business sales also declined 8% year-over-year.
- AMD expects first quarter 2009 revenue to decrease from the fourth quarter 2008.
Fourth Quarter Highlights:
- Fourth quarter revenues were $1.162 billion, down 28% sequentially, excluding third quarter process technology revenue, license revenue.
- Fourth quarter net loss was $1.424 billion, or $2.34 a share.
- Losses from continuing operations were $1.414 billion or $2.32 a share. This includes a negative impact of $996 million in net charges of which $75 million were cash related.
Items to note include $714 million of charges related to impairment of goodwill and acquired intangible assets and amortization of acquired intangible assets, an incremental write-down of inventory of $227 million, restructuring charges of $50 million, Foundry Company formation cost of $23 million and then impairment of the expansion investment of $20 million and a gain of $30 million on buyback of convertible debt.
Fourth quarter operating loss was $1.274 billion, but on a non-GAAP basis was $260 million, compared with $24 million last quarter.
Gross margin in the quarter was 23%. This includes a 20 percentage-point negative impact associated with the incremental inventory write-down of $227 million. AMD took this reserve due to the weak mid-term outlook.
Computing solution revenue was $873 million in the fourth quarter, down 27% compared to the third quarter, excluding the process technology revenue, license revenue. Microprocessor units were down across the board.
Overall, ASPs were slightly down, driven by the drop in client ASPs.
However, server ASPs were up significantly with the introduction ramp of the 45-nanometer Quad-Core Opteron processors. Operating loss for the computing solution group was $431 million, significantly affected by the inventory write-down associated with this business.
In the graphics segment, revenue for the quarter was $270 million, down 30% sequentially. ASPs were up as a result of the stronger product line, the demand in the segment was down significantly. Operating loss for the graphics segment was $10 million.
Cash and marketable security balance at the end of the quarter was $1.1 billion, down $245 million from the prior quarter.
Capital expenditures were $112 million for the quarter and $621 million for the year. As economic conditions deteriorated through the quarter, AMD adjusted spending, coming in well below CapEx guidance of $800 million for 2008.
AMD expects first quarter 2009 revenue to decrease from the fourth quarter of 2008. At the November Analyst Day AMD said it is driving toward a $1.5 billion quarterly breakeven point for the product company.
Given the environment, AMD is reducing the breakeven target to approximately $1.3 billion, based on the programs mentioned earlier.
From a modeling perspective, AMD is maintaining its gross margin goal of 40% or more, so no change from what was told before. R&D is going to be about $300 million a quarter, down from the $325 million outlined in November. This reduction does not compromise the company’s roadmap. SG&A is expected to run around $200 million, down from the $240 million previously guided. Depreciation and amortization will be approximately $100 million per quarter.
Capital expenditures have been reduced to about $45 million per quarter, roughly half of what was discussed at Analyst Day.
Based on lowering the breakeven point, AMD will record a restructuring charge in the first quarter, and will communicate the magnitude later in the quarter.
