AMD 2006 Annual Report Download - page 58

Table of Contents
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and related notes as of December 31, 2006 and
December 25, 2005 and for each of the three years in the period ended December 31, 2006, which are included in this Form 10-K.
Introduction
We are a global semiconductor company with facilities around the world. During most of 2006, within the global semiconductor industry, we offered
primarily:
• x86 microprocessors, for the commercial and consumer markets, which are used for control and computing tasks; and
• Embedded microprocessors for commercial, commercial client and consumer markets.
As a result of our acquisition of ATI in October 2006, we began to supply 3D graphics, video and multimedia products and chipsets for desktop and
notebook PCs, professional workstations, and servers as well as products for consumer electronic devices such as mobile phones, digital TVs and game consoles.
Therefore, since the acquisition, we have actively participated in the semiconductor graphics and chipset markets as well as in the semiconductor market for
consumer electronics devices.
Prior to the closing of the initial public offering, or IPO, of Spansion Inc., on December 21, 2005, which is described in more detail below, we also
manufactured and sold Flash memory devices through Spansion LLC, our former majority-owned subsidiary.
In this section, we will describe the general financial condition and the results of operations for Advanced Micro Devices, Inc. and its consolidated
subsidiaries, including a discussion of our results of operations for 2006 compared to 2005 and 2005 compared to 2004, an analysis of changes in our financial
condition and a discussion of our contractual obligations and off balance sheet arrangements. Our results of operations include sales of graphics, video,
multimedia and chipset products and products for consumer electronics devices from the closing date of the ATI acquisition on October 25, 2006 through
December 31, 2006 in two new reportable segments: (i) Graphics and Chipsets and (ii) Consumer Electronics. We are not able to provide any comparative
information for these two segments because prior to the ATI acquisition, we did not participate in these markets. This MD&A should be read in conjunction with
the other sections of this Form 10-K, including “Part I, Item 1: Business;” “Part II, Item 6: Selected Financial Data;” and “Part II, Item 8: Financial Statements
and Supplementary Data.”
Overview
Total net revenue in 2006 amounted to $5.6 billion, an increase of 44 percent from net revenue, excluding the Memory Products segment, of $3.9 billion in
2005. 2006 included approximately $400 million of net revenue attributable to our two new reportable segments—Graphics and Chipsets, and Consumer
Electronics. Overall growth, however, was primarily driven by the performance of our Computation Products segment where net revenue of $5.1 billion
increased by 35 percent compared to 2005 due to increased unit sales of our desktop, mobile and server processors. We believe that our continued strategy of
developing products based on our customers’ needs combined with our open standards approach, which allows customers to choose the combination of
technologies that best serve their needs, contributed to accelerating customer and end-user adoption of our products across all geographies.
During 2006 we also experienced the following: increasing adoption of our products among enterprises; increasing sales of our server and mobile
processor products; establishment of relationships with key OEMs such as Dell Inc., Founder Technology and Tsinghua Tongfang and strengthening
relationships with existing OEM customers; and a decrease in our dependence on mature markets such as North America and Europe by focusing on high growth
markets, such as China. By the end of 2006, 95 percent of the top 100—and over 65 percent
53
Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007