AMD 2004 Annual Report Download - page 30

Table of Contents
Memory Products
Memory Products net sales of $2.3 billion in 2004 increased 65 percent compared to net sales of $1.4 billion in 2003. The increase was primarily due to
increased demand for Flash memory products across all geographies, which resulted in a nine percent increase in average selling prices, and the effect of
consolidating Spansion’s results of operations, which include Spansion’s sales to Fujitsu of $1.1 billion for 12 months in 2004 compared to $449 million for six
months in 2003. In the second half of 2003, demand for Flash memory products began to increase significantly, and this trend continued through the first half of
2004. In the second half of 2004, however, our Memory Products net sales declined due to aggressive pricing by competitors and an imbalance in the supply and
demand for Flash memory products. In addition, decreased demand from the wireless handset market in Asia, due in part to channel inventory accumulation by
wireless OEMs in China, contributed to a decline in Memory Products net sales during the third quarter. The downturn in the overall Flash memory market,
lower than expected sales in Japan and a delay in qualifying a new Flash memory product for the wireless category contributed to lower Memory Products net
sales during the fourth quarter. Further quantification of the breakdown in the increase in net sales is not practical due to the reorganization of geographical sales
territories between AMD and Fujitsu.
Memory Products net sales of $1.4 billion in 2003 increased 92 percent compared to net sales of $741 million in 2002. The increase was primarily due to
the effect of consolidating Spansion’s results of operations, which include Spansion’s sales to Fujitsu during the last six months of fiscal 2003 and increased
demand for Flash memory products, particularly in the second half of 2003. Further quantification of the breakdown in the increase in net sales is not practical
due to the reorganization of geographical sales territories between AMD and Fujitsu.
Memory Products operating income of $35 million increased $224 million from an operating loss of $189 million in 2003. The increase was primarily due
to the effect of consolidating Spansion’s results of operations, which include Spansion’s sales to Fujitsu, for 12 months in 2004 compared to six months in 2003.
In addition, our manufacturing costs decreased due to our transition to 110-nanometer process technology for certain of our Flash memory products in 2004 and
as a result of increased shipments of Flash memory products based on MirrorBit technology, which are less expensive to manufacture than Flash memory
products based on floating gate technology. Further quantification of the changes is not practical due to the consolidation of Spansion on June 30, 2003.
Memory Products operating loss of $189 million in 2003 increased $30 million from an operating loss of $159 million in 2002. Further quantification of
the changes is not practical due to the consolidation of Spansion on June 30, 2003.
Personal Connectivity Solutions
Personal Connectivity Solutions (PCS) net sales of $131 million in 2004 decreased seven percent compared to net sales of $140 million in 2003. The
decrease was primarily due to a $43 million decrease in sales of certain end-of-life embedded microprocessors, partially offset by a $33 million increase in sales
of AMD Geode products. We acquired the Geode product line from National Semiconductor in August 2003. Accordingly, the increase in sales of AMD Geode
products in 2004 was due to the fact that in 2004 we had 12 months of sales whereas in 2003 we had approximately four months of sales.
PCS net sales of $140 million in 2003 decreased 15 percent compared to net sales of $166 million in 2002. The decrease was primarily due to a $53
million decrease in sales of certain end-of-life embedded microprocessors and networking products, partially offset by a $28 million increase in sales of AMD
Geode and wireless products.
PCS operating loss of $72 million in 2004 increased compared to an operating loss of $14 million in 2003. The increase in the operating loss was primarily
due to a $48 million increase in operating expenses. Operating
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005