AMD 2008 Annual Report Download - page 73

assets of $72 million, a decrease in the write down of acquisition-related intangible assets in 2008, a decrease of
$27 million in integration charges, and the absence of a $28 million charge related to the cost of fair value
adjustment of acquired inventory.
All Other operating loss of $1.6 billion in 2007 increased $869 million compared to an operating loss of
$690 million in 2006. The increase in operating loss was primarily attributable to ATI acquisition-related
impairment charges of $1.1 billion, which included a goodwill write-down of $913 million and a write-down of
acquired intangible assets of $219 million and an increase of $173 million in amortization of acquired intangible
assets, partially offset by a decrease in ATI acquisition-related charges of $448 million. Acquisition-related
charges in 2006 included a $416 million charge for acquired in-process research and development, which did not
recur in 2007. See “ATI Acquisition” above, for additional information.
Comparison of Gross Margin, Interest Income, Interest Expense, Other Income (Expense), Net, Income Taxes
and Other Expenses
The following is a summary of certain consolidated statement of operations data for 2008, 2007 and 2006.
2008 2007 2006
(In millions except for percentages)
Cost of sales ...................................................... $3,488 $3,669 $2,833
Gross margin ..................................................... 2,320 2,189 2,794
Gross margin percentage ............................................ 40% 37% 50%
Research and development ........................................... $1,848 $1,771 $1,190
Marketing, general and administrative .................................. 1,304 1,360 1,138
In-process research and development ................................... — — 416
Amortization of acquired intangible assets and integration charges ........... 137 236 67
Impairment of goodwill and acquired intangible assets ..................... 1,089 1,132 —
Restructuring ..................................................... 90 — —
Gain on sale of 200 millimeter equipment ............................... (193) — —
Interest income .................................................... 39 73 116
Interest expense ................................................... (366) (367) (126)
Other income (expense), net .......................................... 22 (7) (13)
Minority interest in consolidated subsidiaries ............................ (33) (35) (28)
Equity in net loss of Spansion Inc. and other ............................. (53) (155) (45)
Provision (benefit) for income taxes ................................... 68 27 23
Gross Margin
Gross margin as a percent of net revenue increased to 40 percent in 2008 compared to 37 percent in 2007.
However, gross margin in 2008 was impacted by the following two events: the $191 million process technology
license revenue recorded in our Computing Solutions segment favorably impacted gross margin in 2008 by 2
percentage points while the $227 million incremental write-down of inventory negatively impacted gross margin
in 2008 by 4 percentage points. Without the effect of the incremental write-down of inventory and the process
technology license revenue, gross margin would have been 42 percent in 2008 compared to 37 percent in 2007.
This improvement in gross margin, was primarily due to an improvement in fab utilization and reductions in
manufacturing costs. Gross margin in 2008 was also favorably impacted by 1 percentage point due to the 76%
increase in royalty revenue received in 2008 compared to 2007 in connection with the sale of game consoles that
incorporate our graphics technology. Although we experienced a richer product mix in 2008 compared to 2007,
competitive pricing pressures mitigated any significant benefits to gross margin.
Gross margin as a percent of net revenue decreased to 37 percent in 2007 compared to 50 percent in 2006
primarily due to significantly lower average selling prices for our microprocessor products in 2007 compared to
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