Advanced Micro Devices, Inc. (AMD)
Q3 2010 Earnings Call Transcript
October 14, 2010 5:00 p.m. ET

Executives

Ruth Cotter – Vice President, Investor Relations
Derrick R. Meyer – President and Chief Executive Officer
Thomas J. Seifert – Chief Financial Officer

Analysts

Uche Orji – UBS
Glen Yeung – Citigroup
John Pitzer – Credit Suisse
James Covello – Goldman Sachs
Doug Freedman – Gleacher & Company
Timothy Luke – Barclays Capital
Shawn Webster – Macquarie Capital
Ross Seymore – Deutsche Bank
Christopher Danely – J.P. Morgan
Ambrish Srivastava – BMO Capital Markets
Patrick Wang – Wedbush Securities
David Wong – Wells Fargo Securities
Stacy Rasgon – Sanford C. Bernstein

Presentation

Operator

Good afternoon. My name is Latif and I will be your conference operator for today. At this time, I would like to welcome everyone to AMD''s Third Quarter 2010 Earnings Conference Call. All lines have been placed on a listen-only mode at this time. After the speakers'' remarks, you will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded today. I would now like to turn the conference over to Ms. Ruth Cotter, Vice President of Investor Relations for AMD. Please go ahead.

Ruth Cotter

Thank you and welcome to AMD''s third quarter earnings conference call. Our participants today are Dirk Meyer, our President and CEO and Thomas Seifert, our Chief Financial Officer. This is a live call and will be replayed via webcast on amd.com. There will also be a telephone replay. The number is 888-266-2081. Outside of the United States, the number is 703-925-2533. The access code for both is 1485779. The telephone replay will be available for the next 10 days starting later this evening.

Before we start, I would like to highlight a few dates for you. Firstly, AMD will host its financial analyst day on November 9, in its company''s Sunnyvale offices in California. Also, Thomas Seifert, our CFO, will present at the Credit Suisse technology conference on the 1st of December in Arizona and lastly, our fourth quarter earnings quiet time will begin at the close of business on Friday, the 10th of December.

Our Class A preferred share ownership in Global Foundries decreased from 79% as of the end of the second quarter to approximately 77% at the end of the third quarter as a result of additional capital calls that ATIC participated in and AMD did not. As a result, AMD''s ownership on a fully-diluted basis also decreased to approximately 26%. Reconciliation for all non-GAAP financial measures is included in our financial tables that accompany our earnings release, which is also available in the investor relations section of amd.com.

Before we begin today''s call, I''d like to caution everyone that we will be making forward-looking statements about managements'' expectations. Investors are cautioned that those statements are based on current beliefs, assumptions and expectations, speak only as of the current date and involve risks and uncertainties that could cause actual results to differ materially from our current expectations.

The semiconductor industry is generally volatile and market conditions are particularly difficult to forecast, especially in light of the current state of the economy. We encourage you to review our filings with the SEC where we discuss the risk factors that could cause actual results to differ materially from our expectations. You''ll find detailed discussions about such risk factors in our most recent SEC filings, AMD''s quarterly report on Form 10-Q for the quarter ended June 26, 2010.

Now, with that, I''d like to turn the call over to Dirk.

Derrick R. Meyer

Thanks, Ruth and good afternoon to all of you on the call this afternoon. AMD''s third quarter performance was a good demonstration of our capacity to execute profitably in the context of our fabless business model. Despite an environment of weaker-than-expected consumer demand, we improved operating income and non-GAAP adjusted free cash flow sequentially by continuing to focus on growth in the largest margin pools in our industry.

In our client business, we set an all-time record for notebook MPU shipments in the quarter. We saw sequential revenue gains in both our desktop and notebook processor product lines and an improved mix in our notebook offerings.

Our VISION campaign continues to pay dividends across our client business. As you may remember, VISION is designed to both differentiate AMD-based platforms and encourage sell-up to more robust systems in mainstream retail.

During the back-to-school period, our higher-end VISION premium and ultimate platforms accounted for roughly half of VISION brand success. In our server business, we were pleased to add IBM to the list of customers offering AMD Opteron 6000-based systems in the third quarter.