AMD 2011 Annual Report Download - page 58

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Gross Margin
Gross margin as a percentage of net revenue was 45% in 2011 compared to 46% in 2010. Gross margin in
2011 included a $24 million charge recorded in connection with a payment to GF for certain GF manufacturing
assets and a charge of approximately $5 million related to a legal settlement. Gross margin in 2010 included a
$69 million benefit related to the deconsolidation of GF. Absent the effects of these events, which we believe are
not indicative of our ongoing operating performance, our gross margin would have been 45% in each of 2011 and
2010. Gross margin, as adjusted for the factors described above, remained flat in 2011 compared to 2010. During
2011, unit shipments of our low-cost, margin accretive Brazos APU platforms increased compared to 2010.
However, this improvement in gross margin was offset by an unfavorable mix in supply of microprocessor
products manufactured using the 32nm technology node and a decline in average selling price of our
microprocessor products for servers.
Gross margin as a percentage of net revenue was 46% in 2010 compared to 42% in 2009. Gross margin in
2010 included the $69 million benefit related to the deconsolidation of GF. Gross margin in 2009 included $159
million attributable to the Foundry segment and Intersegment Eliminations related to profits on inventory and a
$171 million benefit related to the sale of inventory that had been written-down in the fourth quarter of 2008. The
factors that led to the sale of the inventory that was previously written down were the stabilization of the overall
macroeconomic environment and improved business conditions in 2009 compared to the end of 2008, which led
to an increase in end-user demand for PCs and, correspondingly, an increase in customer orders for, and
shipments of, our products. Absent the effects of these events, which we believe are not indicative of our ongoing
operating performance, our gross margin would have been 45% in 2010 compared to 36% in 2009. The
improvement in gross margin, as adjusted for the factors described above, was primarily attributable to an
improvement in our manufacturing costs, including our utilization of GF’s manufacturing facilities, and higher
average selling price for microprocessors and GPUs due to a favorable shift in product mix.
During 2009, we recorded grants and allowances GF received from the State of Saxony and the Federal
Republic of Germany in connection with GF’s manufacturing facilities in Dresden, Germany as long-term
liabilities on our consolidated financial statements. We amortized these amounts as they were earned as a
reduction to operating expenses. The amortization of the production related grants and allowances were recorded
as a credit to cost of sales. The credit to cost of sales totaled $46 million in 2009. The fluctuations in the
recognition of these credits did not significantly impact our consolidated gross margins. With the deconsolidation
of GF as of the beginning of 2010, our consolidated financial statements no longer directly reflected such credits
to cost of sales. However, these credits had a favorable impact on the amounts that we paid GF pursuant to the
WSA in 2010.
Expenses
Research and Development Expenses
Research and development expenses of $1.5 billion in 2011, increased by $48 million, or 3%, compared to
$1.4 billion in 2010. The increase was primarily due to a $45 million increase in research and development
expenses attributable to our Computing Solutions segment as a result of a $79 million increase in product
engineering and design costs for our future products, partially offset by a $27 million decrease in other employee
compensation and benefit expense and a $7 million decrease in manufacturing process technology expenses
related to GF for our future products.
Research and development expenses of $1.4 billion in 2010, decreased by $316 million, or 18%, compared
to $1.7 billion in 2009. In 2009, research and development expenses included $524 million in research and
development expenses related to the Foundry segment. Without taking into account the research and
development expenses attributable to the Foundry segment, which are not indicative of our ongoing performance,
research and development expenses would have increased by $208 million in 2010 as compared to 2009. This
increase was due to a $224 million increase in research and development expenses attributable to our Computing
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