AMD 1996 Annual Report Download - page 211

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
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OPERATIONS AND FINANCIAL CONDITION
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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The statements in this Management's Discussion and Analysis of Results of
Operations and Financial Condition that are forward-looking are based on current
expectations and beliefs and involve numerous risks and uncertainties that could
cause actual results to differ materially. The forward-looking statements
relate to operating results, cash flows, realization of net deferred tax assets,
capital expenditures and adequacy of resources to fund operations and capital
investments; future business prospects for microprocessors, Flash memory device
products and other product lines; the effect of foreign exchange contracts and
interest rate swaps; the development, validation, certification, introduction,
market acceptance and pricing of the K86/(TM)/ products; the Company's
commitment to research and development; the effective utilization of Fab 25 (as
defined below); the proposed Dresden and FASL manufacturing facilities (which
are defined below); and the assembly and test facility to be constructed in
Suzhou, China. See Financial Condition and Risk Factors below, as well as such
other risks and uncertainties as are detailed in the Company's Securities and
Exchange Commission reports and filings for a discussion of the factors that
could cause the actual results to differ materially from the forward-looking
statements.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto at December 29, 1996 and December 31,
1995, and for each of the three years in the period ended December 29, 1996. On
January 17, 1996, the Company acquired NexGen, Inc. (NexGen) in a transaction
accounted for as a pooling-of-interests. All financial data and footnote
information of the Company, including the Company's previously issued financial
statements for the periods discussed herein, have been restated to give
retroactive effect to the merger with NexGen.
RESULTS OF OPERATIONS
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AMD participates in the digital integrated circuit (IC) market - memory
circuits, microprocessors and logic circuits - through, collectively, its
Communications and Components Group (CCG), its Computation Products Group (CPG)
and its Programmable Logic Division (Vantis). CCG products include Flash memory
devices, Erasable Programmable Read-Only Memory (EPROM) devices, voice and data
communications products, embedded processors, input/output (I/O) devices and
network products. CPG products include microprocessors. Vantis products are
high-speed programmable logic devices. The Company's operations relating to I/O
devices and network products are currently included in the operations of CCG.
The Company previously reported such results as part of CPG. All results for CCG
and CPG for prior periods have been revised to conform to the new
classification.
The following is a summary of the net sales of CCG, CPG and Vantis in 1996, 1995
and 1994:
(Millions) 1996 1995 1994
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CCG $ 1,364 $ 1,434 $ 1,147
CPG 341 778 821
Vantis 248 256 187
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Total $ 1,953 $ 2,468 $ 2,155
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1996 net sales of $2.0 billion declined approximately 21 percent from 1995.
This decrease was primarily due to a decline in Am486/(R)/ microprocessor sales,
as both unit volume and average selling prices decreased significantly. These
decreases were partially offset by sales of AMD-K5/(TM)/ microprocessors which
were introduced in 1996. Net sales of $2.5 billion in 1995 increased
approximately 15 percent from 1994 primarily due to substantial growth in Flash
memory sales and secondarily due to an increase in sales of communications
products, the combination of which more than offset a decline in microprocessor
sales.
CCG net sales decreased from 1995 to 1996, as net sales of Flash memory devices
were flat and unit shipments of other CCG products declined. Flash memory
devices contributed a significant portion of the Company's revenues in 1996 and
1995. In 1996, the market for the Company's Flash memory devices saw increasing
competition and falling prices. The increase in CCG net sales in 1995 was due to
increased sales of Flash memory devices, primarily due to growth in unit
shipments and secondarily due to a change in product mix resulting in higher
average selling prices.
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Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997