AMD 2010 Annual Report Download - page 60

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Comparison of Gross Margin, Expenses, Interest Income, Interest Expense, Other Income (Expense), Net,
Income Taxes and Equity in Net Loss of Investee
The following is a summary of certain consolidated statement of operations data for 2010, 2009 and 2008.
2010 2009 2008
(In millions, except for percentages)
Cost of sales ...................................................... $3,533 $ 3,131 $3,488
Gross margin ..................................................... 2,961 2,272 2,320
Gross margin percentage ............................................ 46% 42% 40%
Research and development ........................................... 1,405 1,721 1,848
Marketing, general and administrative .................................. 934 994 1,304
Legal settlement ................................................... (283) (1,242) —
Amortization of acquired intangible assets .............................. 61 70 137
Impairment of goodwill and acquired intangible assets ..................... — — 1,089
Restructuring charges (reversal) ....................................... (4) 65 90
Gain on sale of 200 millimeter equipment ............................... — — (193)
Interest income .................................................... 11 16 39
Interest expense ................................................... (199) (438) (391)
Other income (expense), net .......................................... 311 166 (37)
Provision for income taxes ........................................... 38 112 68
Equity in net loss of investee ......................................... (462) — —
Gross Margin
Gross margin as a percentage of net revenue was 46% in 2010 compared to 42% in 2009. Gross margin in
2010 included the $69 million benefit related to the deconsolidation impact of GF. Gross margin in 2009
included $159 million attributable to the Foundry segment and Intersegment Eliminations related to profits on
inventory and a $171 million benefit related to the sale of inventory that had been written-down in the fourth
quarter of 2008. The factors that led to the sale of the inventory that was previously written down were the
stabilization of the overall macroeconomic environment and improved business conditions in 2009 compared to
the end of 2008, which led to an increase in end-user demand for PCs and, correspondingly, an increase in
customer orders for, and shipments of, our products.
Absent the effects of the events described above, which we believe are not indicative of our ongoing
operating performance, our gross margin would have been 45% in 2010 compared to 36% in 2009. The
improvement in gross margin, as adjusted for the factors described above, was primarily attributable to an
improvement in our manufacturing costs, including our utilization of GF’s manufacturing facilities, and higher
average selling price for microprocessors and GPUs due to a favorable shift in product mix.
Gross margin as a percentage of net revenue was 42% in 2009 compared to 40% in 2008. Gross margin in
2009 included a $171 million, or 3%, benefit related to the sale of inventory that had been written-down in the
fourth quarter of 2008. Gross margin in 2008 included a $191 million, or 2%, benefit from process technology
license revenue recorded in our Computing Solutions segment and a $227 million, or 4%, negative impact from
an incremental write-down of inventory. Without the effect of the above events in 2009 and 2008, which we
believe gives a more comparable view of these periods, gross margin would have been 39% in 2009 compared to
42% in 2008. Gross margin in the first half of 2009 was adversely impacted by depressed average selling price
and the under-utilization of GF’s manufacturing facilities as a result of reduced demand for our microprocessor
products. However, the adverse impact of these factors on 2009 gross margin was partially mitigated by
developments during the second half of 2009, including improvements in utilization of GF’s manufacturing
facilities and an improvement in our unit costs primarily due to an increase in unit shipments of microprocessors
manufactured using 45nm process technology.
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