AMD 2015 Annual Report Download - page 56

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Comparison of Gross Margin, Expenses, Interest Income, Interest Expense, Other Income (Expense), Net and
Income Taxes
The following is a summary of certain consolidated statement of operations data for 2015, 2014 and 2013.
2015 2014 2013
(In millions, except for percentages)
Cost of sales ...................................................... $2,911 $3,667 $3,321
Gross margin ..................................................... 1,080 1,839 1,978
Gross margin percentage ............................................ 27% 33% 37%
Research and development ........................................... 947 1,072 1,201
Marketing, general and administrative .................................. 482 604 674
Amortization of acquired intangible assets .............................. 3 14 18
Restructuring and other special charges, net ............................. 129 71 30
Goodwill impairment charge ......................................... — 233 —
Legal settlements, net ............................................... — — (48)
Interest expense ................................................... (160) (177) (177)
Other expense, net ................................................. (5) (66) —
Provision (benefit) for income taxes ................................... $ 14 $ 5 $ 9
Gross Margin
Gross margin as a percentage of net revenue was 27% in 2015 compared to 33% in 2014. Gross margin in
2015 was adversely impacted by an inventory write-down of $65 million, which was primarily the result of lower
anticipated demand for older-generation APUs and a technology node transition charge of $33 million. The
impact of the write-down accounted for approximately two gross margin percentage points and the technology
node transition charge accounted for approximately one gross margin percentage point. Gross margin in 2015
was also adversely impacted by a lower proportion of revenue from Computing and Graphics segment due to
lower sales which has a higher average gross margin than our Enterprise, Embedded and Semi-Custom segment
and also by lower game console royalties. Gross margin in 2014 included a $58 million lower of cost or market
inventory adjustment, which accounted for one gross margin percentage point, and a $27 million benefit from
technology licensing revenue, which accounted for less than one gross margin percentage point.
Gross margin as a percentage of net revenue was 33% in 2014 compared to 37% in 2013. Gross margin in
2014 included a $58 million lower of cost or market inventory adjustment, which accounted for one gross margin
percentage point, and a $27 million benefit from technology licensing revenue, which accounted for less than one
gross margin percentage point. Gross margin in 2013 included a $57 million benefit from sales of inventory that
was previously reserved in the third quarter of 2012, which accounted for one gross margin percentage point as
compared to $8 million in 2014 which had a less than one percentage point impact. Gross margin in 2014 was
adversely impacted by lower average gross margins in our Enterprise, Embedded and Semi-Custom segment
driven by increased sales of lower margin semi-custom SoC products.
Expenses
Research and Development Expenses
Research and development expenses of $947 million in 2015 decreased by $125 million, or 12%, compared
to $1.1 billion in 2014. The decrease was primarily due to a $120 million decrease in research and development
expenses attributable to our Computing and Graphics segment and a $21 million decrease in the All Other
category primarily related to a $9 million workforce rebalancing severance charge recorded in 2014 and an $8
million decrease in stock-based compensation expenses. The decrease was partially offset by a $16 million
increase in research and development expenses attributable to our Enterprise, Embedded and Semi-Custom
segment. Research and development expenses attributable to our Computing and Graphics segment decreased
50