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AMD Reports Third Quarter Results

SUNNYVALE, Calif.--(BUSINESS WIRE)--

AMD (NYSE:AMD) today reported third quarter 2008 revenue from continuing operations of $1.776 billion, including process technology license revenue of $191 million. Third quarter 2008 revenue increased 32 percent compared to the second quarter of 2008 and 14 percent compared to the third quarter of 2007.

In the third quarter of 2008, AMD reported a net loss of $67 million, or $0.11 per share. For continuing operations, third quarter 2008 income was $41 million, or $0.07 per share, including the process technology license revenue of $191 million, or $0.31 a share. Third quarter 2008 operating income was $131 million. Loss from discontinued operations was $108 million, or $0.18 a share.

Reconciliation of GAAP to Non-GAAP Net Income (Loss)(1)
(Millions except per
 share amounts)             Q3-08           Q2-08           Q3-07
----------------------------------------------------------------------
GAAP net loss / EPS     $ (67) $(0.11) $(1,189) $(1.96) $(396) $(0.71)
----------------------------------------------------------------------
   Loss from
    discontinued
    operations           (108)  (0.18)    (920)  (1.52)   (52)  (0.09)
----------------------------------------------------------------------
Income (loss) from
 continuing operations     41    0.07     (269)  (0.44)  (344)  (0.62)
----------------------------------------------------------------------
    Gain on sale of
     200mm equipment        -       -      193    0.32      -       -
----------------------------------------------------------------------
    Marketable
     securities
     impairment charges     -       -      (36)  (0.06)   (42)  (0.08)
----------------------------------------------------------------------
    Amortization of
     acquired
     intangibles,
     integration and
     other charges        (30)  (0.05)     (30)  (0.05)   (41)  (0.07)
----------------------------------------------------------------------
   Restructuring
    charges                (9)  (0.01)     (30)  (0.05)     -       -
----------------------------------------------------------------------
Non-GAAP net income
 (loss)                 $  80          $  (366)         $(261)
----------------------------------------------------------------------
Reconciliation of GAAP to Non-GAAP Operating Income (Loss)(1)
(Millions)                                         Q3-08 Q2-08  Q3-07
----------------------------------------------------------------------
GAAP operating income (loss)                       $131  $(143) $(181)
----------------------------------------------------------------------
   Gain on sale of 200mm equipment                    -    193      -
----------------------------------------------------------------------
    Amortization of acquired intangibles,
     integration and other charges                  (30)   (30)   (41)
----------------------------------------------------------------------
   Restructuring charges                             (9)   (30)     -
----------------------------------------------------------------------
Non-GAAP operating income (loss)                   $170  $(276) $(140)
----------------------------------------------------------------------

In the second quarter of 2008, AMD had revenue from continuing operations of $1.349 billion, a net loss of $1.189 billion, a loss from continuing operations of $269 million and an operating loss of $143 million. In the third quarter of 2007, AMD had revenue from continuing operations of $1.558 billion, a net loss of $396 million, a loss from continuing operations of $344 million and an operating loss of $181 million.

"We achieved a significant milestone with the recent announcement of our Asset Smart strategy, which will transform both AMD and the industry through the creation of 'The Foundry Company'," said Dirk Meyer, AMD's president and CEO. "AMD will be assured access to leading-edge manufacturing processes without the obligation to make the capital investment required to maintain a world-class manufacturing operation. We look forward to the successful closing of this joint venture early in 2009."

"We are pleased to have reached our goal of operational profitability this quarter while increasing gross margin to 51 percent," said Robert J. Rivet, AMD's chief financial officer. "Improved execution across all of our businesses was punctuated by a refresh of our graphics product line-up, driving 55 percent sequential revenue growth and market share gains. In addition, customer adoption of our quad-core microprocessors was strong, with unit shipments increasing 46 percent sequentially."

Third quarter 2008 gross margin was 51 percent, and 45 percent excluding process technology license revenue. This compares favorably to both the second quarter 2008 non-GAAP gross margin of 37 percent, and third quarter of 2007 gross margin of 41 percent.

Reconciliation of GAAP to Non-GAAP Gross Margin(1)
(Millions, except percentages)                       Q3-08 Q2-08 Q3-07
----------------------------------------------------------------------
GAAP Gross Margin                                    $905  $696  $635
----------------------------------------------------------------------
GAAP Gross Margin %                                    51%   52%   41%
----------------------------------------------------------------------
Process technology license revenue                    191     -     -
----------------------------------------------------------------------
Gain on sale of 200mm equipment                         -   193     -
----------------------------------------------------------------------
Non-GAAP Gross Margin                                $714  $503  $635
----------------------------------------------------------------------
Non-GAAP Gross Margin %                                45%   37%   41%
----------------------------------------------------------------------
Segment Information
(Millions)                                    Q3-08  vs Q2-08 vs Q3-07
----------------------------------------------------------------------
Computing Solutions (including process
 technology license revenue in Q3-08)
----------------------------------------------------------------------
   Revenue                                    $1,391      26%       8%
----------------------------------------------------------------------
   Microprocessor Units                                    up     down
----------------------------------------------------------------------
   Microprocessor Average Selling Prices
    (ASP)                                                flat     flat
----------------------------------------------------------------------
Graphics (including game console royalties)
----------------------------------------------------------------------
   Revenue                                    $  385      55%      40%
----------------------------------------------------------------------
   Graphic Processor Units                                 up       up
----------------------------------------------------------------------
   Graphic Processor Average Selling Prices
    (ASP)                                                  up       up
----------------------------------------------------------------------

Current Outlook

AMD's outlook statements are based on current expectations of its continuing operations. The following statements are forward looking, and actual results could differ materially depending on market conditions and the factors set forth under "Cautionary Statement" below.

Third quarter 2008 revenue was $1.585 billion, not including process technology license revenue. In light of the current macroeconomic conditions, AMD expects fourth quarter 2008 revenue from continuing operations to be roughly flat to that number.

Additional Highlights

-- As the cornerstone of its Asset Smart strategy, AMD and the
 Advanced Technology Investment Company (ATIC) of Abu Dhabi announced
 an agreement to create a U.S.-headquartered, leading-edge
 semiconductor manufacturing company to address growing demand for
 independent foundry production capabilities. The new global company
 will serve this need by combining advanced process technology,
 industry-leading manufacturing facilities and aggressive plans to
 expand its global capacity footprint.
-- AMD announced that Mubadala Development Corporation will increase
 its stake in AMD from 8.1 percent to 19.3 percent of outstanding
 shares on a fully diluted basis through the purchase of 58 million
 newly issued shares and warrants for 30 million additional shares.
-- AMD introduced the entire ATI Radeon HD 4000 family of graphics
 cards with 10 new products spanning all market segments. From the ATI
 Radeon HD 4870 X2, the world's fastest graphics card designed for the
 ultra-enthusiast, to the ATI Radeon HD 4350 providing a great visual
 experience for the value-minded market. AMD also strengthened its
 workstation graphics product offerings with the introduction of two
 new ATI FirePro graphics products.
-- Dell and HP introduced new quad-core server platforms designed
 specifically to take advantage of the virtualization performance
 advantages of the quad core AMD Opteron processor.
-- AMD expanded its desktop consumer and commercial processor line-up,
 introducing:
     -- Six new desktop processors, including three quad-core and
      three triple-core processors;
     -- Four new AMD Business Class processors, extending the B-series
      product offerings to a total of 11 processors that support the
      essential security and manageability requirements of business
      users.
-- Acer, Dell, NEC, Samsung, Toshiba, and others introduced new
 notebook systems powered by the recently introduced AMD Turion X2
 Ultra notebook platform.
-- 10 of the largest motherboard partners introduced new products
 based on the AMD 790GX desktop chipset, delivering best-in-class 3D
 graphics performance, enhanced scalability and stability for high-
 performance gaming and multimedia.
-- AMD launched a new corporate brand campaign under a new tagline,
 "The Future is Fusion." The campaign focuses on how the unique AMD
 combination of technologies, coupled with close relationships with
 computer manufacturers and a deep understanding of customer needs,
 results in exciting next-generation capabilities and experiences at
 work, at home, and at play.

AMD Teleconference

AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its third quarter financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its Web site at www.amd.com. The webcast will be available for 10 days after the conference call.

About AMD

Advanced Micro Devices (NYSE:AMD) is an innovative technology company dedicated to collaborating with customers and partners to ignite the next generation of computing and graphics solutions at work, home and play. For more information, visit http://www.amd.com.

Cautionary Statement

This release contains forward-looking statements concerning revenue and other expectations for the fourth quarter of 2008, the expected closing of The Foundry Company joint venture and the increased investment by the Mubadala Development Company which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are commonly identified by words such as "would," "may," "expects," "believes," "plans," "intends," "projects," and other terms with similar meaning. Investors are cautioned that the forward-looking statements in this release are based on current beliefs, assumptions and expectations, speak only as of the date of this release and involve risks and uncertainties that could cause actual results to differ materially from current expectations. Risks include the possibility that Intel Corporation's pricing, marketing and rebating programs, product bundling, standard setting, new product introductions or other activities targeting the company's business will prevent attainment of the company's current plans; global business and economic conditions will worsen, resulting in lower than currently expected revenue in the fourth quarter of 2008 and beyond; the company's Asset Smart strategy will not reach fruition or will be less beneficial than anticipated; the announced transaction for the formation of The Foundry Company and the associated third-party investment will not occur as anticipated; demand for computers and consumer electronics products and, in turn, demand for the company's products will be lower than currently expected; customers stop buying the company's products or materially reduce their demand for its products; the company will require additional funding and may not be able to raise funds on favorable terms or at all; the company's cost containment efforts will not be effective; the company will be unable to develop, launch and ramp new products and technologies in the volumes and mix required by the market and at mature yields on a timely basis; there will be unexpected variations in market growth and demand for the company's products and technologies in light of the product mix that it may have available at any particular time or a decline in demand; the company will be unable to transition to advanced manufacturing process technologies in a timely and effective way, consistent with planned capital expenditures; the company will be unable to maintain the level of investment in research and development and capacity that is required to remain competitive; the company will be unable to divest its Handheld or DTV product businesses in the expected timeframe, if at all, or in a manner contemplated by the company; and the company will be unable to obtain sufficient manufacturing capacity or components to meet demand for its products or will under-utilize its microprocessor manufacturing facilities. Investors are urged to review in detail the risks and uncertainties in the company's Securities and Exchange Commission filings, including but not limited to the Quarterly Report on Form 10-Q for the quarter ended June 28, 2008.

(1) In this press release, in addition to GAAP financial results, AMD has provided non-GAAP financial measures for net income (loss), operating income (loss) and gross margin. Non-GAAP net income (loss) excludes discontinued operations, a gain on the sale of 200mm equipment and other certain charges as reflected in the table. Non-GAAP operating income (loss) excludes a gain on the sale of 200mm equipment and other certain charges as reflected in the table. Non-GAAP gross margin excludes process technology license revenue and a gain on the sale of 200mm equipment as reflected in the table. Management believes this non-GAAP presentation makes it easier for investors to compare current and historical period operating results.

AMD, the AMD Arrow logo, AMD Opteron, AMD Phenom and combinations thereof, and ATI, the ATI logo, FireGL and Radeon are trademarks of Advanced Micro Devices, Inc. Other names are for informational purposes only and used to identify companies and products and may be trademarks of their respective owners.

ADVANCED MICRO DEVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions except per share amounts and percentages)


                        Quarter Ended             Nine Months Ended
----------------------------------------------- ----------------------
               Sept. 27,  June 28,   Sept. 29,   Sept. 27,  Sept. 29,
                 2008       2008       2007        2008       2007
              (Unaudited)(Unaudited)(Unaudited) (Unaudited)(Unaudited)
----------------------------------------------- ----------------------

Net revenue       $1,776    $ 1,349     $1,558     $ 4,581    $ 3,997

Cost of sales        871        653        923       2,376      2,608

----------------------------------------------- ----------------------

Gross margin         905        696        635       2,205      1,389

Gross margin %        51%        52%        41%         48%        35%

Research and
 development         422        442        431       1,319      1,261

Marketing,
 general and
 admini-
strative             313        337        346         984      1,029

Amortization
 of acquired
 intangible
 assets and
 integration
 charges              30         30         39          89        127

Restructuring
 charges               9         30          -          39          -

----------------------------------------------- ----------------------

Operating
 income (loss)       131       (143)      (181)       (226)    (1,028)

Interest
 income                7         10         19          32         54
Interest
 expense             (87)       (95)       (95)       (277)      (272)
Other income
 (expense),
 net                  (4)       (10)        (1)        (15)        (8)

----------------------------------------------- ----------------------

Income (loss)
 from
 continuing
 operations
 before
 minority
 interest,
 equity in net
 loss of
 Spansion Inc.
 and other and
 income taxes         47       (238)      (258)       (486)    (1,254)

Minority
 interest in
 consolidated
 subsidiaries         (7)        (7)        (9)        (27)       (26)

Equity in net
 loss of
 Spansion Inc.
 and other             -        (24)       (57)        (24)       (86)

----------------------------------------------- ----------------------

Income (loss)
 from
 continuing
 operations
 before income
 taxes                40       (269)      (324)       (537)    (1,366)

Provision
 (benefit) for
 income taxes         (1)         -         20          (1)        59

----------------------------------------------- ----------------------

Income (loss)
 from
 continuing
 operations       $   41    $  (269)    $ (344)    $  (536)   $(1,425)

Income (loss)
 from
 discontinued
 operations,
 net of tax         (108)      (920)       (52)     (1,078)      (182)
----------------------------------------------- ----------------------

Net income
 (loss)           $  (67)   $(1,189)    $ (396)    $(1,614)   $(1,607)

----------------------------------------------- ----------------------

Net income
 (loss) per
 common share

Basic and
 diluted
 Continuing
  operations      $ 0.07    $ (0.44)    $(0.62)    $ (0.88)   $ (2.59)
 Discontinued
  operations      $(0.18)   $ (1.52)    $(0.09)    $ (1.78)   $ (0.33)
----------------------------------------------- ----------------------
Basic and
 diluted net
 income (loss)
 per common
 share            $(0.11)   $ (1.96)    $(0.71)    $ (2.66)   $ (2.92)

----------------------------------------------- ----------------------

Shares used in
 per share
 calculation

Basic and
 diluted             608        607        554         607        551
ADVANCED MICRO DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
                                                   Sept. 27,  Dec. 29,
                                                     2008     2007(a)
                                                  (Unaudited)
----------------------------------------------------------------------

Assets

Current assets:
   Cash, cash equivalents and marketable
    securities                                       $ 1,341  $ 1,889
   Accounts receivable, net                              620      603
   Inventories                                           844      802
   Prepaid expenses and other current assets             240      396
   Deferred income taxes                                  20       64
   Assets of discontinued operations                     283    1,304

----------------------------------------------------------------------

        Total current assets                           3,348    5,058

Property, plant and equipment, net                     4,440    4,711
Goodwill                                                 945      950
Acquisition related intangible assets, net               224      311
Other assets                                             535      520

----------------------------------------------------------------------

Total Assets                                         $ 9,492  $11,550
======================================================================

Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable                                  $   737  $   992
   Accrued compensation and benefits                     143      183
   Accrued liabilities                                   850      815
   Deferred income on shipments to distributors           65      101
   Current portion of long-term debt and capital
    lease obligations                                    266      238
   Other short-term obligations                           94        -
   Other current liabilities                             226      270
   Liabilities of discontinued operations                 11       26

----------------------------------------------------------------------

        Total current liabilities                      2,392    2,625

Deferred income taxes                                      4        6
Long-term debt and capital lease obligations,
 less current portion                                  4,874    5,031
Other long-term liabilities                              657      633
Minority interest in consolidated subsidiaries           175      265

Stockholders' equity:
   Capital stock:
       Common stock, par value                             6        6
       Capital in excess of par value                  5,981    5,921
   Retained earnings (deficit)                        (4,714)  (3,100)
   Accumulated other comprehensive income                117      163
----------------------------------------------------------------------

        Total stockholders' equity                     1,390    2,990

----------------------------------------------------------------------

Total Liabilities and Stockholders' Equity           $ 9,492  $11,550
======================================================================


(a) Amounts for the year ended December 29, 2007 were derived from the
     December 29, 2007 audited financial statements, adjusted for
     discontinued operations.
ADVANCED MICRO DEVICES, INC.
SELECTED CORPORATE DATA (1)
(Unaudited)
(Millions except headcount and percentages)


                            Quarter Ended           Nine Months Ended
 ---------------------------------------------------------------------

 Segment
  Information from
  Continuing        Sept. 27,  June 28, Sept. 29,   Sept 27, Sept. 29,
  Operations           2008      2008      2007       2008     2007
 ------------------

 ------------------------------------------------- -------------------

 Computing
  Solutions (2)
     Net revenue     $ 1,391   $ 1,101   $ 1,283    $ 3,687   $ 3,299
     Operating
      income
      (loss)         $   143   $    (9)  $  (122)   $   (29)  $  (722)

 Graphics (3)
     Net revenue         385       248       275        894       698
     Operating
      income
      (loss)              47       (38)       11         22       (55)

 All Other (4)
     Net revenue           -         -         -          -         -
     Operating
      income
      (loss)             (59)      (96)      (70)      (219)     (251)

 Total from
  Continuing
  Operations
     Net revenue     $ 1,776   $ 1,349   $ 1,558    $ 4,581   $ 3,997
     Operating
      income
      (loss)         $   131   $  (143)  $  (181)   $  (226)  $(1,028)


 ------------------------------------------------- -------------------

 Revenue
  Reconciliation
 -----------------

 Revenue from
  continuing
  operations         $ 1,776   $ 1,349   $ 1,558    $ 4,581   $ 3,997
 Revenue from
  discontinued
  operations              44        37        74        130       246
                     --------  --------  --------   --------  --------
     Total revenue   $ 1,820   $ 1,386   $ 1,632    $ 4,711   $ 4,243

 Components of
  Discontinued
  Operations
 -----------------

 Operating loss      $   (24)  $   (42)  $   (52)   $  (116)  $  (182)
 Impairment of
  goodwill and
  acquired
  intangible assets      (84)     (876)        -       (960)        -
 Restructuring
  charges                  -        (2)        -         (2)        -
                     --------  --------  --------   --------  --------
     Total loss
      from
      discontinued
      operations     $  (108)  $  (920)  $   (52)   $(1,078)  $  (182)

 ------------------------------------------------- -------------------

 Other Data
 -----------------

 Depreciation &
  amortization
     (excluding
      amortization of
      acquired
      intangible
      assets)        $   266   $   263   $   261    $   794   $   755

 Capital additions   $    83   $   104   $   417    $   509   $ 1,417

 Adjusted EBITDA
  (5)                $   422   $   119   $    66    $   622   $  (237)

 ------------------------------------------------- -------------------

 Headcount            15,460    15,653    16,498     15,460    16,498
 -----------------

 ------------------------------------------------- -------------------


 (1) Comparative amounts adjusted for discontinued operations except
      for headcount data.
 (2) Computing Solutions segment includes microprocessors, chipsets
      and embedded processors. For the quarter ended June 28, 2008 and
      nine months ended September 27, 2008, the operating loss
      includes a $193M gain on the sale of 200 mm equipment. For the
      quarter and nine months ended Sept. 27, 2008, revenue includes
      $191M in technology license revenue.
 (3) Graphics segment includes graphics, video and multimedia products
      developed for use in desktop and notebook computers, including
      home media PCs, professional workstations and servers. Starting
      in the quarter ended June 28, 2008 this segment also includes
      royalties received in connection with the sale of game console
      systems that incorporate the Company's graphics technology.
      Prior periods have been recast to conform to current period
      presentation.
 (4) All Other category includes employee stock-based compensation
      expense and certain operating expenses and credits that are not
      allocated to the operating segments. Also included in this
      category are the restructuring, severance and ATI acquisition-
      related charges. Details of the restructuring, severance and ATI
      acquisition-related charges and employee stock-based
      compensation expense are shown below.
   Restructuring, severance, and ATI acquisition-related charges:
                                                          Nine Months
                                           Quarter Ended      Ended
                                           Q308 Q208 Q307 Q308   Q307
                                           -------------- ------------
   Restructuring charges                   $ 9  $30  $ -  $ 39  $  -
   Severance charges                         -    -    2     -    18
                                           -------------- ------------
     Subtotal                              $ 9  $30  $ 2  $ 39  $ 18

   Amortization of acquired intangible
    assets                                  29   30   34    88   102
   Integration charges                       1    -    5     1    25
                                           -------------- ------------
     Total amortization of acquired
      intangibles and integration charges  $30  $30  $39  $ 89  $127
   Cost of fair value adjustment of
    acquired inventory                       -    -    -     -    18
                                           -------------- ------------
     ATI acquisition-related charges       $30  $30  $39  $ 89  $145
                                           -------------- ------------
   Restructuring, severance, and ATI
    acquisition-related charges            $39  $60  $41  $128  $163
                                           ============== ============



   Employee stock-based compensation expense:
                                                          Nine Months
                                         Quarter Ended        Ended
                                       Q308   Q208  Q307  Q308   Q307
                                      ------------------- ------------
   Cost of sales                      $    2 $    3 $   2  $  8 $    7
   Research and development                9      8    12    32     38
   Marketing, general and
    administrative                         7      6    11    15     36
                                      ------------------- ------------
                                      $   18 $   17 $  25  $ 55 $   81
                                      =================== ============









  (5)  Reconciliation of income (loss) from continuing operations to
        Adjusted EBITDA(a)
                                           Nine Months
                        Quarter Ended          Ended
                     Q308   Q208   Q307   Q308    Q307
                     ------------------- ---------------
       Income (loss)
        from
        continuing
        operations   $ 41  $(269) $(344) $(536) $(1,425)
       Depreciation
        and
        amortization  266    263    261    794      755
       Amortization
        of acquired
        intangible
        assets         29     30     34     88      102
       Interest
        expense        87     95     95    277      272
       Provision
        (benefit)
        for income
        taxes          (1)     -     20     (1)      59
       --------------------------------- ---------------
       Adjusted
        EBITDA       $422  $ 119  $  66  $ 622  $  (237)
                     =================== ===============


 (a) The Company defines Adjusted EBITDA as income (loss) from
      continuing operations adjusted for depreciation and
      amortization, amortization of acquired intangible assets,
      interest expense and taxes. The Company calculates and
      communicates Adjusted EBITDA because management believes it is
      of interest to investors and lenders in relation to its overall
      capital structure and its ability to borrow additional funds.
      The Company's calculation of Adjusted EBITDA may or may not be
      consistent with the calculation of this measure by other
      companies in the same industry. Investors should not view
      Adjusted EBITDA as an alternative to the U.S. GAAP operating
      measure of net income or U.S. GAAP liquidity measures of cash
      flows from operating, investing and financing activities. In
      addition, Adjusted EBITDA does not take into account changes in
      certain assets and liabilities as well as interest and income
      taxes that can affect cash flows.

Source: Advanced Micro Devices, Inc.