This is a summary of the third quarter fiscal 2008 earnings call conducted by Advanced Micro Devices, Inc. (AMD) on October 16, 2008.
Management:
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President and CEO: Dirk Meyer
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EVP and CFO: Bob Rivet
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Director of IR: Ruth Cotter
Key Investor Issues:
- AMD posted a net loss of $67 million, or 11 cents a share, vs. a net loss of $396 million, or 71 cents a share in the same quarter a year ago.
- The chipmaker posted revenue of $1.77 billion for the quarter, including $191 million in revenue tied to a process technology license.
- Operating income was $131 million, or 7 cents a share, including a boost of 31 cents courtesy of the licensing deal.
- Sales in the current quarter are expected to be flat compared to the $1.585 billion in third-quarter sales.
Third Quarter Highlights:
AMD had a well executed third quarter in the context of a challenging economic environment. The company reached its goal of achieving operating profitability in the quarter. AMD launched and shipped a new family of industry leading Radeon HD 4000 graphics products and capitalized on the growing demand for the Quad-Core AMD Opteron processor family as well as the new AMD Turion ultra notebook platform.
Revenue for the quarter was $1.776 billion up 32% sequentially and up 14% year-over-year.
Income from continuing operations was $41 million or $0.07 per share. AMD also reported a loss from discontinued operations of $108 million or $0.18 per share.
Third quarter operating income excluding charges was $170 million compared with a $276 million loss last quarter. Last quarter, a gain on the sale of 200 millimeter equipment was also excluded from the operating loss.
Gross margin in the quarter was 51% including a six percentage point positive impact associated with the process technology license revenue.
Therefore, non-GAAP gross margin was a solid 45% compared with a 37% non-GAAP gross margin in the prior quarter. This increase was due to unit growth volumes and improvement in the product mix.
Computing Solutions revenue was $1.39 billion in the third quarter up 26% from the prior quarter and up 8% compared to the same period a year ago.
Highlights of the quarter included server revenue up 9% sequentially bolstered by a solid 50% unit increase in Quad-Core shipments over the prior quarter.
Quad-Core AMD Opteron processors set several new benchmark records in the quarter including the top x86 web performance scores for both dual and Quad-Core processor systems as well as an x86 record score for Java based server applications.
Notebook processor units and revenues were up from the prior quarter driven by growing customer demand for the AMD Turion X2 ultra notebook platform. Samsung, NEC, Toshiba, MSI and Asus all introduced new skews in the quarter offering the graphics and power efficiency of the AMD on AMD platform.
Desktop unit and revenues were up sequentially on flat ASPs driven by growing AMD Phenom processor sales and growing customer demand for AMD business class solutions.
As a result of these gains, as well as the process technology licensing revenue, operating income for the Computing Solutions Groups was $143 million in the quarter.
In the Graphics segment, revenue for the quarter was $385 million up 55% sequentially and up 40% year-over-year. The company refreshed its graphics product line in the quarter with the introduction of 10 new leadership Radeon 4000 series products that span from the enthusiast to the value segment including the ATI Radeon HD 4870 X2, the fastest graphics card in the world. These timely introduced leadership products return the Graphics segment to profitability resulting in operating income from the Graphics segment of $47 million.
Cash and marketable security balance at the end of the quarter was $1.34 billion down from $1.57 billion in the prior quarter.
Third quarter 2008 revenue from continuing operations was $1.585 billion not including process technology license revenue. The company expects fourth quarter revenue from continuing operations to be roughly flat to that number. Amortization of acquired intangibles is expected to be approximately $30 million. Depreciation and amortization expected to be approximately $280 million.
