Analyst Conference Summary

conference date: July 17, 2008 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2008 (2nd quarter 2008)

Forward-looking statements

Overview: Not good, complicated by discontinuation of handheld and DTV products.

Basic data (GAAP):

Revenues were $1.35 billion, down 7.5% sequentially from $1.46 billion but up 3% from $1.31 billion year-earlier.

Net loss was $1.19 billion, compared to a loss of $358 million in Q1 and $600 million year-earlier.

EPS was negative $1.96.

Guidance:

"In the seasonally up third quarter, AMD expects revenue to increase in line with seasonality." Break even point goal $1.5 billion, was $1.6 billion in Q2. Operating expenses down 4% sequentially. $300 million depreciation and amortization. $900 million planned capital expenses for the full year.

Conference Highlights:

Dirk Meyer elected to President and CEO effective immediately. Hector Ruiz will remain as executive chairman and will continue to drive to break our industry from the grip of an illegal monopoly. Dirk: we have great potential, but have not been living up to it.

The loss from discontinued operations was $920 million ($1.52 per share), mainly non-cash; the loss from continuing operations was $269 million ($0.44 per share). There was a one-time gain of $193 million on sale of equipment; a $36 million marketable securities impairment charge; a $30 million amortization charge; and a $30 million restructuring charge.

"While we had a disappointing quarter financially, customer adoption of our recently introduced microprocessor and graphics products and platform offerings is strong, and we see increasing momentum across our businesses," said Robert J. Rivet, AMD's chief financial officer, but "remain committed to achieving operating profitability in the second half of the year."

But getting traction with new products, in particular quad-core and graphics chips. "We are regaining server momentum and regaining key customers," based on strength in floating point calculations and energy efficiency. Offering customers leading price performance points and customizing chips for specific markets. Over 100 Puma notebook chip design wins.

Gross margin was 52%, but only 37% if the equipment sale is excluded.

Microprocessor revenue was $1.10 billion, down 8% sequentially and flat from year-earlier. Graphic processor revenue was $248 million, up 8% sequentially and up 18% from year earlier. [Note: for Q1 AMD listed graphics revenues as $230 million. But for Q2 $248 million in graphic revenue was marked as down 5% sequentially. I don't know where the mistake is, but it might have to do with discontinued operations math.]

$143 million GAAP operating loss, but non-GAAP loss of $269 million.

Cash balance $1.57 billion, down $186 million sequentially. $119 million adjusted EBITDA. $104 million capital expenditures. Long term debt ended at $5 billion.

Conversion to 45 nm is "well on track."

Cost of sales was $653 million, leaving $696 million gross margin. Research and development expense was $442 million.

Q&A:

Timeline for profitability? Expect to be profitable on the operating level in the 2nd half due to momentum of new products and reduced costs. Will need asset smart execution and continued good execution on 45 nm process.

Drop in capital expenditure level despite 45 nm? Started production late last quarter of 45 nm, will start volume production in early Q4, full changeover in 2009.

Difference in strategic direction from you appointment to CEO? Our combined x86 and grahics leadership will allow us to focus more narrowly on volume sweetspots, notably servers.

The $200 million of assets convertable to cash is mainly administrative buildings and may not happen quickly.

OEM lineup for new products did not happen until into Q2, so won't see results, particularly in servers, until Q3. Should see higher volume and higher ASPs. Q3 is normally a strong quarter for graphic chip sales.

Normal seasonality? Data suggests range is 2% to 14%, with 8% to 10% most typical.

Did products match market demand? The market is shifting to multiple cores, so prices for single core processors are low. We are also shifting to more server chips in the mix, which will help range margins. We believe 4800 series graphics chips will be the best in the market and will contribute to better margins.

What kind of profitability are you talking about? First operating profitability, then net profitability. We used to say $2.0 billion was our break even point, but looked at overall picture and decided we could get down to $1.5 billion; we are a bit above $1.6 billion right now.

Puma vs. new Intel platform? Puma will be a big contributor to revenues and margins. Refresh for notebooks occurs for back-to-school season. Volume Puma shipments will take off in Q3.

Fusion architecture? Puma represents that at the platform level. Integrating it on the chip level will start with sampling next year.

Macroeconomic effect on Q3 seasonality? From customers we expect normal Q3, with global demand compensating for weak U.S. demand.

Cash flow from operations was negative $240 million.

Pricing pressure? Graphics price pressure due to competitor's action to keep position when we came out with new products. Microprocessor pricing was in normal range of pressure. We are more exposed to consumer space, we are trying to improve that mix towards the business space. We had 15 design wins with our business class platform in Q2.

ASPs and units in Q2? Unit volume was down a little bit, most revenue decrease was due to lower prices (ASP).

Compete with Atom? We have no intention to compete with Atom. We are smaller than Intel and need to focus our efforts on few products. However, we are interested in low power notebooks.

Will discontinued operations result in a cash charge? No, we expect them to result in a cash inflow when sold.

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