AMD 2003 Annual Report Download - page 29

Table of Contents
to a $53 million decrease in revenue resulting from discontinued production of selected mature embedded processors and networking products and a $34 million
decrease in Foundry Services revenue, offset by a $28 million increase in revenues from sales of AMD Geode and wireless products.
Net Sales Comparison for Years Ended December 29, 2002 and December 30, 2001
Total net sales of $2,697 million in 2002 decreased 31 percent compared to net sales of $3,892 million in 2001.
Computation Products net sales of $1,756 million in 2002 decreased 29 percent compared to net sales of $2,466 million in 2001. This decrease was almost
wholly due to a decrease in unit sales of 16 percent, and a decrease in average selling prices of 13 percent, reflecting industry-wide weakness in PC sales,
competitive pricing pressure, and the execution of our plan to align our microprocessor inventory in the supply chain with forecasted customer demand, which
included our decision to limit shipments and accept receipt of product returns from certain customers.
Memory Products net sales of $741 million in 2002 decreased 35 percent compared to net sales of $1,133 million in 2001. The decrease was primarily due
to a decrease in average selling prices of 36 percent, reflecting continued weakness in the telecommunications and networking equipment industries.
All Other net sales of $200 million in 2002 decreased 32 percent compared to net sales of $293 million in 2001. The decrease was primarily due to a
decrease in Foundry Services revenues of approximately $64 million and a decrease in net sales of $31 million from embedded processors and networking
products as a result of sustained market declines in the communications and networking equipment industries.
Comparison of Gross Margin Percentage, Expenses, Interest Income and Other, Net, and Interest Expense
The following is a summary of gross margin percentage, expenses and interest income and other, net, and interest expense for 2003, 2002 and 2001:
2003 2002 2001
(Millions except for gross
margin percentage)
Cost of sales $ 2,327 $ 2,106 $ 2,590
Gross margin percentage 34% 22% 33%
Research and development 852 816 651
Marketing, general and administrative 587 670 620
Restructuring and other special charges, net (14) 331 89
Interest income and other, net 21 32 26
Interest expense 110 71 61
Income tax provision (benefit) 3 45 (14)
Gross margin percentage increased to 34 percent in 2003 compared to 22 percent in 2002. The increase in gross margin was primarily due to an increase in
net sales of 30 percent, accompanied by an increase in cost of sales of only ten percent. Our cost of sales increased at a lower rate than net sales primarily due to
cost reductions from the 2002 Restructuring Plan and other cost reduction initiatives. In addition, microprocessor unit sales increased 15 percent while average
selling prices of microprocessor products decreased by four percent, and we realized $63 million, or approximately two percentage points resulting from the sale
of microprocessor products that had been previously written off. Further quantification of the improvement in gross margin percentage is not practical due to the
consolidation of FASL LLC’s operating results on June 30, 2003.
We amortize capital grants and allowances, interest subsidies and research and development subsidies that we receive from the State of Saxony and the
Federal Republic of Germany for Fab 30 as they are earned. The
24
Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004