Analyst Conference Summary

conference date: October 14, 2008 @ 2:30 PM Pacific Time
for quarter ending: September 30, 2008 (3rd quarter 2008)

Forward-looking statements

Overview: Year-over-year revenues barely budge; uncertain about Q4. However, profit margins increased.

Basic data [GAAP] :

Revenue of $10.2 billion was up 8% sequentially from $9.47 billion and up 1% from 10.1 billion year-earlier.

Net Income of $2.01 billion was up 26% sequentially from $1.60 billion and up 12% from $1.79 billion year-earlier.

EPS (earnings per share) were $0.35, up 25% sequentially from $0.28, and up 17% from $0.30 year-earlier.

Guidance:

Q4 revenue between $10.1 and $10.9 billion, with 59% gross margin. Another $250 million in restructuring and impairment charges from NAND flash memory discontinuation. 29% tax rate. $1.1 billion in depreciation.

Outlook has larger range than usual due to uncertainty in economy.

Conference Highlights:

Record Q3 income [but barely]. For Q4 "it is hard to know what impact the financial crisis will have on end customer demand." Emphasized uncertainty. Revenue was in line with normal seasonality compared to Q2.

Our competitive position has stengthened. We are a generation ahead of the competition.

Gross margin was 58.9%, operating margin 30%. Increase was driven by lower unit costs.

Atom microprocessor revenue was about $200 million.

Overall microprocessor ASP (average selling price) was lower, but excluding Atom ASP was flat.

There was a $265 million net loss from equity investments and interest income, mainly from a $250 million impairment from Numonyx.

$2.1 billion cash was used to repurchase 93 million shares.

Nehalem product family of microprocessors began shipping in quarter.

$3 billion in spending has been removed since 2006, and had about 20,000 less employees.

Cash on hand is $11.8 billion and Q3 cash flow was over $3 billion. $1.4 billion for capital expenses. $800 distributed in dividends. $2.1 billion spent on stock repurchases.

NAND operations to be shut down. Singapore fab now on hold. Solid state drive family launched.

Softness in corporate segment in September, while consumer segment was seasonal. Inventories in good shape, but Taiwan cutting back. Healthy interest in notebooks and netbooks.

In Q4 expect some further corporate purchasing softness. Consumer interest seems light right now.

There will be a mid-quarter update on December 4th.

Over 45% of total revenue was from mobility group, up 23% from Q2.

Asia Pacific/Japan had 12% revenue growth, better than usual seasonal. U.S. was weak due to corporate weakness. EMEA was at low end of seasonal patterns.

Spending (expense) was flat against forecasts and Q2. 29% effective tax rate, lower than forecast.

Q&A:

Q4 is not typically front end loaded. We don't believe any of our customers accelerated shipments into Q3 (that would usually go to Q4).

Gross margins? We did better than expected in Q3, believe Q4 guidance is about right.

AMD foundry plan possible effects? Nothing has changed. Someone has to invest in capital and convert that to products. We believe we are able to integrate design and manufacturing. That is one of our core assets. We tend to be a generation ahead of the rest of the industry.

Cannibalization of more expensive processors by Atom? Almost all shipments are going into Netbooks. No evidence of cannibalization so far.

Ramping new processes? Lower capital spending rate is not about slowing down new process technology (like 32 nm). We still plan to do 32 nm as fast as we can.

Will we see more price improvement from 45nm going forward? No, we have made most of the gains for this level.

Startup costs for 32nm? That should start in the first half of 2009.

Inventories up 4% in quarter. Has something changed? Expected to build this inventory in Q3, and will build a bit more in Q4 which will be all 45nm products.

This is not a post dot-com type of downturn. There is not an oversupply of computers this time. We have continuing strength in emerging market. China is on track to become our largest market in a reasonable amount of time. The cost of computing has come down relative to people's income levels. Technology productivity tools will do well during a downturn.

Competitive dynamic in servers? We have been gaining share, as shown by IDC tracking numbers. Believes AMD Shanghai will not cut into Intel's lead.

Atom has a very healthy profit margin.

Server business impacted in Q3 due to economic weakness? It was weak in September realtive to what we would normally expect. But financial services represents only 15 to 18% of our server business.

As mobile grows the ASPs will come down, but never to the level of desktops.

What are customers telling you the last couple of weeks? Business has been good so far for Q4. Some customers and channels are worried, but we don't know how much worry will become reality.

High end versus low end servers? Introduction of Dunnington skewed to MP products in Q3. Guessing that DP servers will do better this quarter.

China demand was across the board. Japan demand was for notebook chips, which are then exported in notebook computers.

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