AMD 2007 Annual Report Download - page 53

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 as of December 29, 2007 and December 31, 2006 and
for each of the three years in the period ended December 29, 2007 and related notes thereto, which are included in this Form 10-K.
Introduction
We are a global semiconductor company with facilities around the world. Within the global semiconductor industry, we offer primarily:
• x86 microprocessors, for the commercial and consumer markets, embedded microprocessors for commercial, commercial client and consumer
markets and chipsets for desktop and notebook personal computers, or PCs, professional workstations and servers;
• graphics, video and multimedia products for desktop and notebook computers, including home media PCs, professional workstations and servers; and
• products for consumer electronic devices such as mobile phones and digital televisions and technology for game consoles.
Prior to the closing of the 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 AMD and its consolidated subsidiaries, including a
discussion of our results of operations for 2007 compared to 2006 and 2006 compared to 2005, 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 effective date of the ATI acquisition on October 25, 2006 through December 29, 2007 in the following
reportable segments: (i) Computing Solutions (including Chipsets), (ii) Graphics and (iii) Consumer Electronics. We are not able to provide any comparative
information for the latter two segments prior to the ATI acquisition, since 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
Fiscal 2007 was a challenging year for AMD. Our net revenue in 2007 of $6.0 billion increased six percent from net revenue of $5.6 billion in 2006.
However, revenue increased because we included the operations of our Graphics and Consumer Electronics segments for the entire fiscal year rather than just
nine weeks in 2006. Net revenue for our Computing Solutions segment decreased 12 percent due to lower average selling prices for our microprocessor products,
which resulted from delays in the introduction and broad availability of our quad-core processors, aggressive pricing by our principal competitor and a higher
concentration of sales of processors for desktop and notebook PCs in 2007. Correspondingly, gross margins in 2007 decreased compared to gross margins in
2006 as a result of lower average selling prices for our microprocessor products and increased manufacturing costs during the first half of 2007. Furthermore,
gross margins were adversely impacted due to the consolidation of ATI’s operations into ours for the full fiscal year in 2007 compared to nine weeks in 2006.
Historically, the ATI business had lower gross margins compared to AMD.
Despite the challenges that we encountered during 2007, we made positive strides towards improving our performance. Although average selling prices for
our microprocessor products declined in 2007 compared to 2006, they improved in the second half of 2007 compared to the first half of 2007 as our product mix
improved
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008