AMD 2007 Annual Report Download - page 64

Table of Contents
Consumer Electronics
Consumer Electronics net revenue and operating loss in 2007 were $408 million and $17 million, respectively. Consumer Electronics net revenue and
operating income for the period from October 25, 2006 through December 31, 2006 were $120 million and $20 million, respectively. The increase in revenue
was due to the inclusion of operations attributable to the Consumer Electronics segment for the full year in 2007 compared to only nine weeks in 2006. The 2007
operating loss resulted primarily from significantly lower unit shipments in the second quarter of 2007 due to decreased demand from a key OEM customer. This
demand recovered moderately during the remainder of the year. Consumer Electronics net revenue was flat in the second half of 2007 compared to the first half
of 2007. A decrease in revenue from sales of products used in handheld devices was offset by an increase in revenue from royalties on game consoles. Due to the
seasonal increase in royalties on game consoles in the second half of 2007, the operating loss for the first half of 2007 improved slightly to an operating profit for
the second half of 2007. We did not sell comparable products prior to the ATI acquisition.
Memory Products
As a result of Spansion’s IPO in December 2005, we stopped manufacturing and selling memory products. Therefore, we did not have a Memory Products
segment in 2006 and 2007.
All Other Category
We did not have any net revenue for the All Other category in 2007. All Other net revenue in 2006 decreased by $10 million from 2005, primarily because
we had minimal revenue from sales of PIC products and customers returned previously sold PIC products. Effective as of the third quarter of 2006, we ceased
production of PIC products.
All Other operating loss of $2.1 billion in 2007 increased by $1.4 billion compared to an operating loss of $720 million in 2006. The increase in operating
loss was primarily attributable to ATI acquisition-related impairment charges of $1.6 billion, which included a goodwill write-down of $1.3 billion and a
write-down of specific intangible assets of $349 million and an increase of $224 million in amortization of acquired intangible assets, partially offset by a
decrease in ATI integration charges of $453 million. Integration charges in 2006 included $416 million in expenses for acquired in-process research and
development, which did not recur in 2007. See Part II, Item 7 “MD&A—ATI Acquisition.”
All Other operating loss of $720 million in 2006 increased by $677 million compared to an operating loss of $43 million in 2005. The increase in operating
loss was primarily attributable to ATI acquisition-related charges of $557 million and an increase in employee stock-based compensation expense and profit
sharing expense of $104 million. ATI acquisition-related charges included an in-process research and development write-off of $416 million, amortization of
acquired intangible assets of $47 million, cost of fair value adjustments to acquired inventory of $62 million and a $32 million charge associated with the
integration of ATI’s operations, which included termination of some AMD employees, cancellation of some existing contractual obligations and other costs that
we incurred to integrate the operations of the two companies.
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008