AMD 2008 Annual Report Download - page 72

under “Expenses,” below. Manufacturing expenses increased primarily due to increased unit volumes of
microprocessors, a shift to higher-end microprocessors and the inclusion of ATI’s chipset business in the
Computing Solutions segment for a full year in 2007, as opposed to only nine weeks in 2006.
Graphics
Graphics net revenue of $1.2 billion in 2008 increased by $173 million or 17 percent compared to 2007
revenue of $992 million. The increase was primarily due to a 12 percent increase in revenue from sales of GPU
products and a 76 percent increase in royalty revenue from the sales of game consoles that incorporate our
graphics technology. Revenue from the sales of GPU products increased due to an increase in unit shipments of
GPUs while GPU average selling prices were approximately flat. GPU unit shipments increased in 2008
compared to 2007 due to demand for new products, including the ATI Radeon HD 4000 series of products which
we introduced in June 2008. Although unit shipments increased in 2008 compared to 2007, we saw a significant
decline in unit shipments in the fourth quarter of 2008 due to the weak macroeconomic environment and
resulting decrease in demand. Royalty revenue increased due to increased demand for the latest generation of
game consoles.
Graphics operating income in 2008 was $12 million compared to an operating loss of $39 million in 2007.
The $51 million operating improvement was due to the increase in revenue referenced above. The increase in
revenue was partially offset by a $77 million increase in cost of sales because of higher unit shipments and
increased research and development and marketing, general and administrative expenses, which increased for the
reasons set forth under “Expenses” below.
Graphics net revenue and operating loss in 2007 were $992 million and $39 million, respectively. Graphics
net revenue and operating loss for the period of October 25, 2006 through December 31, 2006 were $189 million
and $6 million, respectively. The increases in revenue and operating losses were due to the inclusion of the
operations attributable to the Graphics segment for the full year in 2007 compared to only nine weeks in 2006.
Graphics net revenue in the second half of 2007 increased 35 percent over the first half of 2007 due to the
successful introduction of new products and the seasonal increase in royalties on game consoles. From the first
half of 2007 to the second half of 2007 unit shipments increased by 19 percent and average selling prices
increased by 9 percent. The improvement in net revenue was the primary driver that significantly narrowed the
operating loss from the first half of 2007 to the second half of 2007. We did not sell comparable products prior to
the ATI acquisition.
All Other
All Other net revenue of $84 million in 2008 decreased by $80 million or 49 percent compared to net
revenue of $164 million in 2007. All Other net revenue is from sales of products included in our Handheld
business unit.
All Other net revenue of $164 million in 2007 increased by $93 million or 131 percent compared to 2006
revenue of $71 million. All Other net revenue reflects sales of products included in our Handheld business unit
for the full year of 2007 compared to only nine weeks of 2006. All Other net revenue in 2006 also includes the
impact of customer returns of previously sold Personal Internet Communicatory (PIC) products. Effective as of
the third quarter of 2006, we ceased production of PIC products.
All Other operating loss of $1.5 billion in 2008 decreased by $53 million compared to an operating loss of
$1.6 billion in 2007. The decrease in the operating loss was primarily attributable to a $124 million decrease in
ATI acquisition-related charges and a $43 million decrease in impairment of goodwill and acquired intangible
assets, partially offset by $90 million in restructuring charges and $23 million of expenses in connection with the
formation of The Foundry Company manufacturing joint venture incurred in 2008. ATI acquisition-related
charges decreased in 2008 compared to 2007 due to a decrease in amortization expense of acquired intangible
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