AMD 2005 Annual Report Download - page 36

Download and view the complete annual report

Please find page 36 of the 2005 AMD annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 154

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154

Table of Contents
PCS operating loss of $55 million in 2005 was flat compared to an operating loss of $54 million in 2004. The increase in net sales of $5 million from 2004
to 2005 was offset by an increase in operating expenses of $6 million.
PCS operating loss of $54 million in 2004 increased compared to an operating loss of $12 million in 2003. The increase in the operating loss was primarily
due to a $31 million increase in operating expenses. Operating expenses increased due to an increase of approximately $23 million in manufacturing costs as a
result of a change in product mix and an aggregate increase of $9 million in marketing, general and administrative expenses as a result of activities related to our
AMD Geode products and other product development. Manufacturing costs increased primarily because we manufactured more AMD Geode products, which
generally are more expensive to manufacture than our other embedded processors.
All Other Category
All Other net sales in 2005 were $6 million because of sales of PIC products. We did not generate any material sales from PIC products in 2004 or 2003.
All Other operating loss of $19 million in 2005 decreased from $25 million in 2004, primarily due to restructuring and other special charges of $5 million
incurred during 2004 due to a change in our estimate of potential sublease revenue.
All Other operating loss in 2004 was $25 million compared to operating income of $1 million in 2003. We incurred an operating loss in 2004, primarily
due to operating expenses associated with developing and marketing PIC products. In addition, All Other operating loss in 2004 included approximately $5
million of restructuring and other special charges due to a change in our estimate of potential sublease revenue, while in 2003 we had a $14 million credit
adjustment to the restructuring charge primarily because we reduced the estimate of the numbers of positions to be eliminated in response to the additional
resources required due to the Spansion LLC transaction and reversed the associated severance and fringe benefit accrual.
Comparison of Gross Margin, Expenses, Interest Income and Other Income (Expense), Net, Interest Expense, Income Taxes and Other Expenses
The following is a summary of certain consolidated statement of operations data for years ended December 25, 2005, December 26, 2004 and
December 28, 2003:
2005 2004 2003
(In millions except for
percentages)
Cost of sales $ 3,456 $ 3,033 $ 2,327
Gross margin percentage 41% 39% 34%
Research and development $ 1,144 $ 935 $ 852
Marketing, general and administrative 1,016 807 587
Restructuring and other special charges (recoveries), net — 5 (14)
Interest income and other income (expense), net 14 (31) 21
Interest expense 105 112 110
Loss on dilution of equity interest in Spansion Inc. 110 — —
Income tax (benefit) provision (7) 6 3
Gross Margin
Gross margin percentage increased to 41 percent in 2005 compared to 39 percent in 2004. The improvement in gross margin percentage was primarily due
to microprocessor net sales, which comprised a greater percentage of total net sales in 2005 as compared to 2004. Microprocessor net sales carried a higher gross
margin than Flash
31
Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006