This summary is based on the third quarter fiscal 2007 earnings call conducted by Advanced Micro Devices Inc. (AMD) on October 18, 2007.
Management:
Chief Executive Officer: Hector Ruiz
President, COO: Dirk Meyer
Chief Finance Officer: Bob Rivet
Investor Relations: Mike Haase
Key Investors Issues
- Revenues were up 23% to $1.36 billion.
- The firm recorded a net loss of $396 million or 71 cents per share.
- The $1.7 billion outstanding balance of the term loan used to acquire ATI was paid in full.
Year-to-date Highlights:
- Revenues were up 9.5% to $4.2 billion.
- The firm realised a loss of $1.6 billion from a profit of $410 million in the prior year.
- EPS were down from 82 cents in 2006 to negative $2.92.
Third Quarter Highlights
The firm realised revenues of $1.36 billion, up 23% from $1.33 billion in 2006 fueled by a steady flow of new products and robust demand for offerings.
- Mobile processor revenues were up due to strong customer response to the AMD value proposition and the firm’s innovative brand strategies.
- The company recorded a net loss of $396 million or 71 cents per share from a profit of $136 million or 27 cents a share in 2006 as a result of a $76 million or 14 cents per share charge from ATI acquisition-related integration and severance charges and $42 million or 8 cents per share charge associated with the impairment of the holding and the common stock of Spansion.
- Gross margin decreased to 41%, from 51% the prior year following an inventory charge of $30 million for older generation microprocessor material.
- Total operating expenses which include R&D and SG&A were up $263 million from the previous year.
Cash and marketable securities was $1.53 billion and includes $118 million representing the value of a holding in Spansion common stock, which has been reclassified for long-term investments to marketable securities.
- The company netted $1.48 billion from a 5.75% convertible debt offering using the proceeds with additional cash of $200 million to repay in full the $1.7 billion outstanding balance of the term loan used to acquire ATI.
- The firm also had $800 million in non-operational cash generating opportunities and collected $200 million through the sale of a portion of the Spansion investment, 200 millimeter tool sales, and administrative asset sales.
Total inventory was $839 million, down $53 million from the prior quarter, with days of inventory outstanding improving to 80 days.
The inventory is fresh with the vast majority of microprocessor inventory DDR2 compatible and more than 70% of the GPU inventory comprised of the new HD 2000 family.
Performance of Business Segments:
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In Computing solutions revenue was $1.28 billion, down 3.4% from $1.33 billion despite sequential increases in microprocessor revenue and unit shipments.
- Revenues include sales of chipsets sold by ATI prior to acquisition by AMD.
Notebook processor unit shipments growth remained strong, increasing 68% year-over-year.
- The firm incurred an operating loss of $112 million, from a profit of $167 million in 2006 on weak revenue performance.
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In the graphic segment revenue was $252 million as sales of the ATI Radeon HD 2000 series were strong, representing more than half of the graphic processor sales for the quarter.
- Design win momentum continued to be strong, however, the firm realised an operating loss of $3 million.
In Consumer electronics revenue was $97 million with strong sales from handheld gadgets and increases in gaming console royalties.
The firm recorded a loss of $3 million, an improvement from a loss of $22 million in the previous quarter.
Operational Highlights:
- The desktop processor business continued to do well with record unit volume sales.
- Shipment of the new quad-core AMD Opteron processors commenced during the quarter and initial customer excitement and demand was high.
- While the initial production ramp of quad-core Opterons was slower than anticipated, the firm anticipates the product to be widely available by the middle of the fourth quarter.
- GPU revenues were led by robust adoption of the ATI Radeon HD 2000 family and AMD-based platforms.
Processors and AMD 690 chipsets have been used combination with systems from HP, Lenovo, NEC, Packard Bell, Samsung and Toshiba
- Toshiba announced plans to introduce commercial notebooks based on the AMD Turion 64 processors and the AMD 690 chipset.
- Customer and end user anticipation is growing for the upcoming Spider platform, the ultimate gaming enthusiast platform featuring AMD Phenom processors, RD 790 chipsets and RV 670 graphics cards.
