AMD was named Best-in-Class Supplier for Standard Silicon in Sun Microsystems’ 2007 Supplier Awards program, was also awarded CMP Channel’s VAR Business 2007 Tech Innovator of the Year award for the server category, and AMD’s quad-core processor technology won 2007 Best of VMworld Awards for the Green Computing category.
Improving Internal Efficiencies:
- Manufacturing performance in fab 36 inDresden remained strong, exceeding targets for output, yield and cycle time.
- Supply chain transformation efforts are starting to produce results, with the company doing well in matching product delivery to customer demands while at the same time reducing inventories.
- The firm has controlled the growth of operating expenses and will continue to focus on increasing the efficiency of all areas of the company, including R&D, sales, marketing and administration.
- Notwithstanding the internal efficiency drive, headcount increased 42% to 16,498 from 11,609 in the prior year.
Transition to new technologies:
The firm completed the transition to 65 nanometer technology in fab 36 and will be transitioning fab 30 to a 300 millimeter tool set and as a result, the mainstream processor business will be based on 65 nanometer 300 millimeter technology by year end.
Plans are on course to ramp up the 45 nanometer product production in the first half of 2008.
In the graphics processor business, the firm will launch the RV 670, the world''s first 55 nanometer GPU in the fourth quarter.
Fourth Quarter Outlook:
- Revenues are expected to increase in line with seasonality.
- Operating expenses, including R&D, SG&A, and employee stock-based compensation are expected to be up 6%, driven by investments in new process technology.
- ARC charges are expected to be $75 million.
- Capital expenditures are expected to be $300 million.
Key questions and answers from the third quarter earnings call conducted by Advanced Micro Devices Inc. on October 18, 2007.
Krishna Shankar (JMP Securities): Any comments on the server business and the outlook for growth?
Dirk Meyer: We shipped tens of thousands of quad-core Opterons in the third quarter. That did not have a material contribution to the overall server business though. We expected to ship hundreds of thousands of quad-core CPUs in both server and desktop in the fourth quarter and we will increase the number of quad-core server processors shipped.
Chris Danely (JP Morgan): What milestones do you need to hit to become profitable?
Bob Rivet: Our goal is to make money in any given quarter, we needed to be approaching the $2 billion revenue level and north of 40% gross margin to achieve that goal since we are not going to cut our way to make the bottom line happen.
Chris Danely (JP Morgan): When do you expect to start shipping either at 2.4GHz or 2.5GHz Barcelona?
Dirk Meyer: We expect to ship the 2.5GHz product in the middle of this quarter.
JoAnne Feeney (FTN Midwest): Could you describe your ASPs by desktop and notebook?
Bob Rivet: In the client space, whether it was in the notebook or desktop, we saw improvement in ASP in both categories. A slight decline in the server space, but it drove the overall up.
JoAnne Feeney (FTN Midwest): In the notebook space, was the price competition confined to the consumer space?
Bob Rivet: That is the place we mostly play in. We continue to try to expand in the commercial space, but our notebook offering sits in the consumer space.
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