AMD 2006 Annual Report Download - page 66

Table of Contents
The following is a summary of our net revenue and operating income (loss) by segment for 2006, 2005 and 2004.
2006 2005 2004
(In millions)
Net revenue:
Computation Products $ 5,104 $ 3,793 $ 2,528
Embedded Products 149 136 130
Graphics and Chipsets 278 — —
Consumer Electronics 120 — —
All Other (2) 6 —
Memory Products — 1,913 2,343
Total Net Revenue $ 5,649 $ 5,848 $ 5,001
Operating income (loss):
Computation Products $ 706 $ 641 $ 280
Embedded Products (18) (55) (54)
Graphics and Chipsets (33) — —
Consumer Electronics 20 — —
All Other (722) (43) (39)
Memory Products — (311) 35
Total Operating Income (Loss) $ (47) $ 232 $ 222
Computation Products
Computation Products net revenue of $5.1 billion in 2006 increased 35 percent compared to net revenue of $3.8 billion in 2005 primarily as a result of a 35
percent increase in unit shipments. Unit shipments increased in 2006 compared to 2005 due to increased demand for processors in each of the desktop, server and
mobile products. However, we believe that the challenge we experienced with the ability of our supply chain to keep up with the increased demand across a
diverse set of customers and geographies and to deliver products on a timely basis had an adverse impact on unit shipments. Despite a richer product mix in
2006, average selling prices remained relatively flat in 2006 as compared to 2005. Higher average selling prices in the first half of 2006 were offset by lower
average selling prices in the second half of 2006 due to competitive market conditions. Specifically, in the second half of 2006 aggressive pricing by our
principal competitor in an attempt to regain market share adversely impacted our average selling prices. Our competitor also launched its quad-core multi-chip
module processors during the fourth quarter of 2006, and since we did not offer quad-core products during this period, we discounted the selling price of certain
of our competing products which adversely impacted our average selling prices, margins and profitability. We do not anticipate shipping our first quad-core
products until mid-2007. We anticipate that 2007 will continue to remain extremely competitive, particularly with respect to product pricing.
Computation Products net revenue of $3.8 billion in 2005 increased 50 percent compared to net revenue of $2.5 billion for 2004 primarily due to an
increase of 37 percent in unit shipments and an increase of nine percent in average selling prices. Unit shipments increased due to greater demand for our
desktop, mobile and server products across all geographic regions, particularly in North America and Greater China. In addition, our introduction of AMD
Turion 64 processors for notebook PCs in March 2005, AMD Opteron dual-core processors for servers and workstations in April 2005 and AMD Athlon 64
dual-core processors for desktop PCs in May 2005 helped drive increasing customer adoption of our products. The increase in average selling prices was
primarily due to increased sales of our higher priced, high-performance AMD64-based processors which contributed to a richer product mix.
Computation Products operating income of $706 million in 2006 increased by $65 million, or 10 percent, compared to operating income of $641 million in
2005. This increase was primarily due the 35 percent increase
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007