AMD 2010 Annual Report Download - page 58

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average selling price. Competitive market conditions and the macroeconomic challenges that affected the global
economy, especially in the first half of 2009, caused us to decrease the price of many of our Computing Solutions
products, and also contributed to a shift in our product mix to lower end microprocessors. The increase in unit
shipments was primarily attributable to an increase in demand for chipsets and microprocessors for notebooks.
Chipset unit shipments increased, especially in the second half of 2009, as customers increasingly adopted AMD
chipsets with our microprocessor products. Unit shipments of our microprocessors for notebooks increased,
especially in the fourth quarter of 2009, due to increased demand in the overall notebook PC market, as end users
increasingly demanded notebook PCs over desktop PCs.
Computing Solutions operating income was $529 million in 2010 compared to $142 million in 2009. The
improvement was primarily due to the increase in net revenue referenced above and a $25 million decrease in
cost of sales, partially offset by a $224 million increase in research and development expenses and a $61 million
increase in marketing, general and administrative expenses. Cost of sales decreased due to reductions in
manufacturing costs and a one-time benefit related to the deconsolidation of GF in 2010. Research and
development expenses and marketing, general and administrative expenses increased for the reasons set forth
under “Expenses,” below.
Computing Solutions operating income was $142 million in 2009 compared to an operating loss of $458
million in 2008. Operating results for 2009 are not comparable to operating results for 2008 because of the
creation of the Foundry segment in the first quarter of 2009, which resulted in our reporting certain research and
development and marketing, general and administrative expenses in the Foundry segment that we would
previously have reported in the Computing Solutions segment. Operating loss in 2008 included a $193 million
gain on the sale of 200 millimeter equipment and $191 million of process technology license revenue that did not
occur in 2009.
Graphics
Graphics net revenue of $1.7 billion in 2010 increased 43% compared to net revenue of $1.2 billion in 2009.
The increase was due to a 49% increase in net revenue from sales of GPU products. Net revenue from sales of
GPU products increased primarily due to an increase in both GPU unit shipments and average selling price. Unit
shipments increased due to strong demand for our DX 11—ATI Radeon™ products. However, the increase was
limited by supply constraints primarily related to constrained wafer foundry capacity in the first half of 2010.
Supply constraints improved in the third quarter of 2010, and we did not experience any supply constraints
during the fourth quarter of 2010. GPU average selling price increased due to a favorable shift in our product mix
to higher end GPU products.
Graphics net revenue of $1.2 billion in 2009 increased 3% compared to net revenue of $1.1 billion in 2008.
The increase was due to a 5% increase in revenue from the sale of GPU products partially offset by a 3%
decrease in royalty revenue received in connection with sales of game console systems that incorporate our
graphics technology. Revenue from the sale of GPU products increased due to an increase in GPU unit shipments
partially offset by a decrease in GPU average selling price. GPU unit shipments increased primarily due to an
increase in demand for our graphics products, especially our 40nm ATI Radeon HD 5000 series of products,
which we introduced in September 2009. We believe that the increase in GPU unit shipments was limited as a
result of supply constraints with respect to our next generation GPUs. GPU average selling price decreased due
to competitive pricing pressure and a shift in our product mix to more value-priced GPUs. However, the decline
in GPU average selling price that we experienced during the first three quarters of 2009 was mitigated by
improved GPU average selling price in the fourth quarter of 2009 primarily due to sales of our higher priced ATI
Radeon HD 5000 series of products. Royalty revenue decreased primarily due to decreased demand for the latest
generation of game consoles in light of the macroeconomic environment in the first half of 2009.
Graphics operating income was $149 million in 2010 compared to $35 million in 2009. The improvement
was primarily due to the increase in net revenue referenced above, partially offset by a $345 million increase in
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