AMD 2002 Annual Report Download - page 23

Table of Contents
Other IC revenues in the first quarter of 2003 to continue to decline due to our decision to discontinue manufacturing certain of our embedded processor and
networking products.
Foundry Services segment service fees of $34 million decreased by 65 percent in 2002 compared to 2001. We expect that foundry services segment
service fees will continue to decline in the first quarter of 2003 due to the termination of our foundry service arrangement with Legerity in the third quarter of
2002, and the termination of the foundry service arrangement with Vantis, which represented 18 percent of the total Foundry Services revenue in 2002, in the
third quarter of 2003.
Net Sales Comparison for Years Ended December 30, 2001 and December 31, 2000
Total net sales decreased by $752 million in 2001, or 16 percent, to $3,892 million from $4,644 million in 2000.
PC processors net sales of $2,419 million increased by four percent in 2001 compared to 2000. This increase was primarily due to an increase in unit sales
of our AMD Athlon and AMD Duron microprocessors, partially offset by a decline in average selling prices.
Memory products net sales of $1,133 million decreased by 28 percent in 2001 compared to 2000. The decrease was primarily due to continuing weakness
in the communications and networking equipment industries and excess inventories held by major customers.
Other IC products net sales of $242 million decreased by 47 percent in 2001 compared to 2000. The decrease was due to decreased net sales of platform
products, embedded processors and networking products as a result of the sustained market declines in the communications and networking equipment industries.
Foundry Services segment service fees of $98 million decreased by 31 percent in 2001 compared to 2000. The decrease was primarily due to a significant
reduction in demand for wafer fabrication services from Vantis, partially offset by an increase in overall service fees from Legerity.
There were no sales from Voice Communications segment in 2001. Voice Communications products contributed $140 million to our 2000 net sales, prior
to our sale of Legerity.
Comparison of Expenses, Gross Margin Percentage, Interest and Other Income, Net and Interest Expense
The following is a summary of expenses, gross margin percentage, and interest and other income, net and interest expense for 2002, 2001 and 2000:
2002 2001 2000
(Millions except for gross margin percentage)
Cost of sales $ 2,106 $ 2,590 $ 2,515
Gross margin percentage 22% 33% 46%
Research and development $ 816 $ 651 $ 642
Marketing, general and administrative 670 620 599
Restructuring and other special charges 331 89 —
Gain on sale of Legerity — — 337
Interest and other income, net 32 26 86
Interest expense 71 61 60
We operate in an industry characterized by intense competition, rapid product development cycles and high fixed costs due to capital-intensive
manufacturing processes, particularly the costs to build and maintain state-of-the-art production facilities required for PC processors and memory devices. As a
result, our gross margin
18
Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003