Analyst Conference Summary

conference date: April 15, 2008 @ 2:30 PM Pacific Time
for quarter ending: March 31, 2008 (1st quarter 2008)

Forward-looking statements

Overview: Not a very good quarter, with typical seasonality, but apparently better than many had expected.

Basic data:

Revenue was $9.7 billion, down 10% sequentially from $10.7 billion in Q4 2007, but up 9% from year-earlier $8.85 billion (Q1 2007).

Net income was $1.4 billion, down 36% sequentially from $2.3 billion and down 12% from year-earlier $1.64 billion.

Earnings per share (EPS) were $0.25, down 34% sequentially and down 11% from year-earlier $0.28.

Guidance:

Q2 2008 revenue between $9.0 and $9.6 billion, reflecting seasonality and decreased NOR memory revenue resulting from Numonyx transaction.

Gross margin around 56%. $250 million restructuring and impairment charges. $1.1 billion depreciation.

Full 2008 gross margin around 57%. R&D expense to increase to $6.0 billion. $5.2 billion capital spending. $4.4 billion depreciation. 33% tax rate.

Conference Highlights:

Demand was strong across all market segments but prices for NAND memory chips were weak. Demand from 45nm products was particularly strong and all Xeons are now at 45nm. Strong server demand in North America. Record server revenue with strength at high end.

In desktop quad core remains a competitive strength. Mobility group accounted for more than one-third of total revenue. At $3.7 billion it was down 11% sequentially, but up 11% from year-earlier. Mobile microprocessors unit sales were up y/y but average pricesdeclined due to growth in lower price segments.

NAND oversupply situation being dealt with be slowing production growth; we intend to make money in this segment. Combined NAND and NOR flash revenue fell 15% from Q4.

Restructuring and asset impairment charges of $0.04 per share ($329 million) are included in GAAP numbers. This includes $275 million for assets transferred to Numonyx.

Effective tax rate was 33.5 %, higher than 31% expected, due to sale of assets to Numonyx and larger proportion of taxes paid in high-tax jurisdictions.

Gross margin of 54% was down 4% sequentially but up 4% from year-earlier.

Cost of sales was $4.47 billion. Gross margin $5.21 billion. R&D expense $1.47 billion. Marketing, general and administrative $1.35 billion. Restructuring and impairment $329 million. Total operating expenses $3.15 billion. Operating income $2.06 billion. $59 million loss on equity investments. $168 million interest and other income. $2.17 billion income before taxes. $728 million tax provision.

By geography, Americas showed strongest growth at 17% due to strong server demand. EMEA up 8%, Asia-Pacific 8%, Japan up 4% (all y/y).

85,000 employees end of Q1, down 1700 from Q4 with more going out with Numonyx.

Inventories were down $98 million sequentially, but building new inventory

Cash and equivalents ended at $13.2 billion, down $1.6 sequentially, but $2 billion positive cash flow from operations. $2.5 billion stock buy-back in quarter.

Q&A:

Linearity of quarter? On microprocessor side saw nothing unusual. 4th quarter of basically flat microprocessors price due to our lead over competitor.

NAND market going forward? Expecting a continued weak pricing environment going forward.

Inventory? We were low for CPUs in Q4, we usually try to build some inventory in Q2. The inventory is good quality, as build up is of newer processors.

Market share in desktop and notebooks? Wait for independent reports on market share. Suspect some share gain in servers. We crossed over to more notebook sales than desktop sales. Netbook product does seem to be driving growth.

Ramping of third 45nm factory, which is in Israel, should move some taxes to a lower rate jurisdiction.

Europe? We had a very, very good Q4 in Europe. Over 6 months Europe is not showing any signs of weakness. Y/Y growth was 8%, which is typical for Europe. Prices are low in Europe due to low dollar.

NAND impact on gross margin was negative in Q1, but expect to be more neutral for rest of year.

Worry about driving AMD out of business? Not our worry. A year and a half ago we did not have technology leadership and financial results looked different.

Chip set revenue? Chip sets as a whole were strong in Q4 and Q1 drop was in usual range. We also lost some revenue due to handset business divestiture. Chip sets tend to build up before microprocessors, trough in Q2. Our view is we are very competitive in chip sets.

Competition for Atom? HP has one based on Via today. We think Atom is the superior choice.

Long term goal on spending is to grow slower than revenue.

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