Analyst Conference Summary

Advanced Micro Devices, Inc.

conference date: April 21, 2011 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2011 (first quarter, Q1)

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Forward-looking statements

Overview: Good unit shipments, okay revenue, net income so-so.

Basic data (GAAP):

Revenue was $1.61 billion, down 2% sequentially from $1.65 billion, but up 3% from $1.57 billion in the year-earlier quarter.

Net income was $510 million, up 36% sequentially from $375 million, and up 98% from $257 million year-earlier.

EPS (earnings per share) were $0.68, up 36% sequentially from $0.50, and up 94% from $0.35 year-earlier.


Revenue is expected to be flat to slightly down sequentially in Q2 2011. $620 million operating expense.

Conference Highlights:

One time $492 million gain in equity investment is included in GAAP numbers. Non-GAAP net income was $56 million or $0.08 per share, down 47% sequentially from $105 million and also down 11% from $63 million year-earlier. AMD's ownership of GlobalFoundries was reduced to 12% and so will no longer be reported as part of Profit and Loss statements.

Demand for first generation Fusion APUs was strong and "greatly exceeded expectations". "We are excited to build on that momentum now that we are shipping our Llano APU." High-end Llano systems should be widely available in Q2.

"We know we have the best IP portfolio in the business."

Gross margin was 43% GAAP, 45% non-GAAP. Flat q/q.

Computing solutions segment revenue was $1.2 billion, down 2% sequentially but up 3% y/y. ASPs (average selling prices) were lower, but were offset by higher desktop processor unit sales. The APU for embedded systems launch went particularly well. But server business was soft overall. Has hired more server sales personnel, and will ship Bulldozer based systems by the end of the summer.

Graphics segment revenue was $413 million, down 3% sequentially and flat y/y. Set a record for AMD mobile discrete graphic revenue. There was a sequential, seasonal decrease from lower royalties from game console system sales. Apple is using AMD Radeon graphics in its Macbook Pro and iMac lines.

Cash and equivalents ended at $1.745 billion, down $44 million sequentially. Long-term debt is $2.2 billion. $198 million EBITDA.

Cost of sales were $922 million, leaving a gross margin of $691 million. Research and development expense was $367 million (up $43 million y/y). Marketing, general and administrative expense was $261 million. Amortization $9 million. Leaving GAAP operating income of $54 million. Interest net expense was $44 million. Other income $11 million. Income tax provision $2 million. Equity income from investment $492 million.

CEO search is in candidate interview stage, with excellent candidate interest.


Given competitor's result, outlook on global PC demand? We expect 11% PC growth in 2011.

Llano, will consumers be compelled by graphics? Volume sales in Q2. We saw fantastic success with Brazos platform in Q1. We think we are right on target.

Brazos success? Across the board, across the OEM portfolio. Now seeing in white box market in emerging markets.

Proportions of Brazos, Llano in notebooks? Half notebook sales in Q1 were Brazos. Both platforms have good margins, but set lower price points.

Corporate market? Obviously we have done better in the consumer market and that is our focus. We are seeing adoption of consumer devices in enterprises.

Server market share stabilized in the first quarter. We will see Bulldozer revenue in Q3 after shipping in summer.

Discrete graphics attach rates? We have a high share of discrete graphics market, we hope to increase profitability, and so far attach rates are flat to up. Of course with APUs, at the low end attach rates could drop. But if you want graphics with our competitor's chips, you need discrete graphics attached.

Guidance to slightly down Q2? Box would be zero to minus 5%. Gross margin up about 100 basis points.

We hope to hit the back-to-school cycle with Llano. In Q3 we should see strength with combination of Llano and Bulldozer.

We expect several 28nm tape outs this quarter.

Chipsets? Pleased with chipset performance in Q1, better than 2010 levels.

Extra week in Q1? Guidance in Q2 is for one week less, but that is the normal. With same weeks as Q1, guidance would be up.

We saw strong demand in China, India, Brazil, and in emerging markets. Brazos products are right on the price point those markets demand.

Aggression of Intel on next generation process nodes? TSMC and GlobalFoundries, in aggregate, will spend more than Intel. We do not need to invest AMD money in this. Competitiveness is based on more than process generations.

Tablet strategy? We have a lot of IP for it, we are working with multiple OEMs on platforms, we'll talk about it when there is something definite to talk about.

We expect graphics ASPs to be flat in Q2.

Operating expense keeping AMD from profit growth? We have been tough on operating expenses. We are working on increasing productivity. Q2 guidance includes a couple of 28nm tapeouts. For the year our expectation is revenue will outgrow operating expenses.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2011 William P. Meyers