AMD 2009 Annual Report Download - page 51

products, especially our six-core AMD Opteron processors for servers, which we introduced in June 2009 and
our ATI Radeon 5000 series of GPUs, which we introduced in September 2009. We also settled the AMD-Intel
litigation in November 2009, resulting in a new patent cross-licensing agreement, unprecedented ground-rules for
fair competition in the microprocessor industry and a cash settlement of $1.25 billion for AMD. As economic
conditions and our performance improved in the fourth quarter of 2009, we also restored salaries to pre-reduction
levels, and in the first quarter of 2010, we will make a one-time payment to restore the full salary for the
September through November 2009 period to all of our employees who participated in the salary reduction
during that time.
Net revenue for 2009 was $5.4 billion, a decrease of 7 percent compared to 2008 net revenue of $5.8 billion.
Net revenue in 2008 included $191 million of process technology license revenue related to the sale of 200
millimeter equipment. Excluding the favorable impact of this process technology license revenue, which we
believe gives a more comparable view of net revenue, 2009 net revenue would have declined 4 percent compared
to 2008 due to a 5 percent decrease in the net revenue of our Computing Solutions segment. The decrease in our
Computing Solutions segment net revenue was due to a significant decrease in average selling price throughout
2009. Competitive market conditions and the macroeconomic challenges that affected the global economy during
the first half of 2009 caused us to decrease the price of many of our Computing Solutions products and also
contributed to a shift in our product mix to lower end microprocessors. However, buoyed by an improving
economy and increasing demand for our products, net revenue of our Computing Solutions segment improved 39
percent in the fourth quarter of 2009 compared to the fourth quarter of 2008 and 14 percent compared to the third
quarter of 2009 due to a significant increase in unit shipments.
Gross margin as a percentage of net revenue was 42 percent in 2009, a 2 percentage point increase
compared to 40 percent in 2008. Gross margin in 2009 included a $171 million, or 3 percent, benefit related to
the sale of inventory that had been written-down in the fourth quarter of 2008. Gross margin in 2008 included a
$191 million, or 2 percent, favorable impact from process technology license revenue recorded in our Computing
Solutions segment and a $227 million, or 4 percent, negative impact from an incremental write-down of
inventory. Without the effect of the above events in 2009 and 2008, which we believe gives a more comparable
view, gross margin would have been 39 percent in 2009 compared to 42 percent in 2008. Gross margin in the
first half of 2009 was adversely impacted by depressed average selling price and the under-utilization of GF’s
manufacturing facilities as a result of reduced demand for our microprocessor products. However, the adverse
impact of these factors on 2009 gross margin was partially mitigated by developments during the second half of
2009, including improvements in utilization of GF’s manufacturing facilities and improvements in our unit costs
primarily due to an increase in unit shipments of microprocessors that were manufactured using 45 nm process
technology.
Our operating income for 2009 was $664 million compared to an operating loss of $2.0 billion in 2008. In
2008, the operating loss included a $193 million gain on the sale of 200 millimeter equipment, $191 million of
process technology license revenue and $1.1 billion in impairment charges and charges related to the write-down
of assets. In the fourth quarter of 2009, operating income included $1,242 million of income from the settlement
of our litigation with Intel. Without the impact of these events, which we believe gives a more comparable view,
our operating income would have improved $672 million due principally to a $437 million decrease in our
research and development and marketing general and administrative expenses primarily due to the effect of our
cost reduction initiatives.
Our cash, cash equivalents and marketable securities as of December 26, 2009 were $2.7 billion compared
to $1.1 billion at December 27, 2008. Of the $2.7 billion cash, cash equivalents and marketable securities, $904
million constituted GF cash and cash equivalents. This increase was primarily due to proceeds received upon the
consummation of the GF manufacturing joint venture transaction in the first quarter of 2009, proceeds of $1.25
billion from the settlement of our litigation with Intel and $440 million from the issuance of our 8.125% Notes,
partially offset by approximately $1.8 billion in payments for the redemption and repurchase of our outstanding
debt.
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