AMD 2005 Annual Report Download - page 32

Table of Contents
Results of Operations
We review and assess operating performance using segment revenues and operating income (loss) before interest, taxes and minority interest. These
performance measures include the allocation of expenses to the operating segments based on management’s judgment.
Prior to the third quarter of 2003, we had two reportable segments: the Core Products segment, which consisted of the microprocessor, memory products
and other IC products operating segments, and the Foundry Services segment, which consisted of fees for products sold to Vantis Corporation, our former
programmable logic devices subsidiary, and Legerity Inc., our former voice communication products subsidiary.
Effective June 30, 2003, we and Fujitsu executed agreements to integrate our Flash memory operations including our existing joint manufacturing venture,
Fujitsu AMD Semiconductor Limited, or FASL. FASL was contributed to a new entity, Spansion LLC (formerly known as FASL LLC), which was owned 60
percent by us and 40 percent by Fujitsu. As a result of this transaction, we began consolidating Spansion’s results of operations on June 30, 2003. Prior to
June 30, 2003, we accounted for our share of FASL’s operating results under the equity method.
As a result of the formation of Spansion LLC effective June 30, 2003, we reorganized our operating segments and created the following two reportable
segments:
• the Computation Products segment, which includes microprocessor products for desktop and mobile PCs, servers and workstations and chipset
products; and
• the Memory Products segment, which includes Spansion Flash memory products.
In addition to our reportable segments, we also have the All Other category that is not a reportable segment. It includes several operating segments as well
as certain operating expenses and credits that are not allocated to any of our operating segments because our Chief Executive Officer, who is our Chief Operating
Decision Maker, or CODM, does not consider these operating expenses and credits in evaluating the operating performance of our operating segments.
In the fourth quarter of 2004, we began presenting our Personal Connectivity Solutions operating segment as a separate reportable segment because this
operating segment’s operating losses exceeded 10 percent of the combined operating income (loss) of all our operating segments. Therefore this operating
segment became a reportable segment under the requirements of Statement of Financial Accounting Standards 131 “Disclosures about Segments of an Enterprise
and Related Information” (SFAS 131). Previously, we included our Personal Connectivity Solutions operating segment in our All Other category. The Personal
Connectivity Solutions segment includes primarily low-power, high-performance x86 and MIPS architecture-based embedded microprocessors and products for
global commercial and consumer markets.
Our All Other category also includes our PIC products, which were reviewed separately by our CODM beginning in the third quarter of 2005. PIC is not a
reportable segment because the net operating results for the PIC operating segment constitute less than 10 percent of the combined operating income of all our
operating segments. Prior to 2005, revenue from sales of PIC products was not material.
As a result of Spansion’s IPO in December 2005 and, our deconsolidation of Spansion’s operating results effective December 21, 2005 discussed above,
we allocated profit sharing and bonus expenses to the specific operating segments that earned them. Therefore, these expenses are no longer included in the All
Other category.
The results of operations for our operating segments presented and discussed in this section follow our segment structure discussed above, and all prior
period amounts have been reclassified to conform to the current year segment presentation.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006