AMD 1999 Annual Report Download - page 122

Memory Group net sales of $773 million increased by 38 percent in 1999
compared to 1998 primarily as a result of strong growth in demand for Flash
memory devices, which was slightly offset by a decline in net sales of EPROMs.
Demand for Flash memory devices remained strong. However, our ability to achieve
further growth will depend upon our ability to increase our Flash memory
manufacturing capacity, as to which we cannot give any assurance.
Communications Group net sales of $298 million were relatively flat between
1999 and 1998. Increases in net sales from our new Ethernet controllers and
physical layer circuits, as well as increases in net sales of linecard circuits,
were offset by a weakness in the mature network products. In October 1999, we
announced our intention to sell certain assets of the Communications Group.
Through June 15, 1999, Vantis products contributed $87 million to our 1999
net sales. On June 15, 1999, we sold Vantis to Lattice Semiconductor Corporation
for approximately $500 million in cash. As a result, there were no sales from
Vantis in the third and fourth quarters of 1999. As part of the sale of Vantis,
we negotiated various service contracts with Lattice to continue to provide,
among other things, wafer fabrication and assembly, test, mark and pack services
to Vantis. Pursuant to these contracts, we received service fees of $43 million
from Lattice during 1999. We expect the wafer fabrication and assembly, test,
mark and pack service contracts to continue until September 2003.
Net Sales Comparison of Years Ended December 27, 1998 and December 28, 1997
Total net sales increased by $186 million, or eight percent, to $2,542 million
in 1998 from $2,356 million in 1997.
CPG net sales of $1,484 million increased by 58 percent in 1998 compared to
1997. This increase was primarily due to increased sales of microprocessors at a
higher speed grade mix and higher average selling prices.
Memory Group net sales of $561 million decreased by 23 percent in 1998
compared to 1997 primarily due to a significant decline in the average selling
price of Flash memory devices. This decrease was partially offset by an increase
in unit sales of Flash memory devices. Oversupply in the Flash market, combined
with an increase in competition, caused downward pressure on the average selling
price of Flash memory devices in 1998. In addition, average selling prices and
unit sales of EPROMs declined.
Communications Group net sales of $292 million decreased by 35 percent in
1998 compared to 1997 primarily due to a significant decrease in unit sales of
nearly all products. Our offerings of network products, which represented
approximately one-half of the decline in Communications Group net sales, did not
keep pace with the market shift towards higher performance products. Our sales
of telecommunication products were particularly impacted by the general economic
downturn in Asia.
Vantis net sales decreased 16 percent to $205 million from the prior year
due to a decrease in unit shipments and lower average selling prices of low-
density or simple PLD (SPLD) products. The total available market for SPLD
products decreased as older SPLD products were replaced by complex PLD (CPLD)
and field programmable gate array (FPGA) products in new designs.
Comparison of Expenses, Gross Margin Percentage and Interest Income and Other,
Net
The following is a summary of expenses, gross margin percentage and interest
income and other, net for 1999, 1998 and 1997:
(Millions except for gross margin percentage) 1999 1998 1997
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Cost of sales $1,964 $1,719 $1,578
Gross margin percentage 31% 32% 33%
Research and development $ 636 $ 567 $ 468
Marketing, general and administrative 540 420 401
Restructuring and other special charges 38 -- --
Gain on sale of Vantis 432 -- --
Litigation settlement -- 12 --
Interest income and other, net 32 34 35
Interest expense 69 66 45
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Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000