Analyst Conference Summary
conference date: January 17, 2008 @ 2:00 PM Pacific Time
Overview: Major differences between GAAP and non-GAAP net income preclude any simple summary of the quarter.
Revenues were $1.77 billion, up 8.5% sequentially from $1.63 billion and flat from $1.77 billion year-earlier.
GAAP net income was negative $1.77 billion (apparently that is correct), compared to a loss of $226 million in Q3 and $576 million year-earlier. See non-GAAP data below.
EPS loss was $3.06, compared to a loss of $0.71 in Q3 and a loss of $1.08 year-earlier.
Expects revenue to decrease in Q1 in line with normal seasonality. Operating expenses are expected to be up 5% compared with Q4. Expects $55 million in acquisition related charges. $15 million tax expense. $315 million for depreciation and amortization. $425 million for capital expenditures.
There were $1.772 billion in charges, representing the difference between GAAP and non-GAAP accounting. $1.608 billion was for impairment of goodwill and acquired assets from the ATI acquisition. $61 million was ATI related severance charges. There was a tax benifit of 63 million from the ATI charges, and a Spansion investment impairment charge of $69 million. Of all that $1.606 were non-cash charges.
Which gives non-GAAP numbers of a loss of "only" $9 million, or negative $0.00 EPS.
Gross margin improved to 44% from 41% in Q3 and 36% year-earlier.
They had record microprocessor unit shipments including nearly 400,000 quad-core processors [oi: but revenues may lag a quarter behind shipments]. Computing solutions segment revenue was $1.402 billion, up 9% sequentially. Server, mobile and desktop revenues all increased, for a 11% sequential microprocessor overall increase, on a 7% increase in units shipped. Server unit shipments were up 22% sequentially due to quad-core Opteron shipments. ASPs trended higher.
$114 million positive operating cash flow. $203 million positive EDIDA. Cash and equivalents increased to $1.89 billion, partly due to a $608 investment by Mubadala Development Company.
Graphics revenue was $259 million, up 3% sequentially. Radeon HD 3800 and HD 2000 series led the growth.
Consumer electronics division revenue was $109 million, up 12% sequentially.
During the quarter the Spider platform was launched and Toshiba introduced its first AMD-based notebooks designed for business use.
Cost of sales were $985 million, leaving a gross margin of $785 million or 44%. R&D expense was $473 milion, marketing general and administrative was $321 million, amortization of acquired assets was $61 million and impairement charges were $1.608 billion. Operating loss was $1.678 billion. Interest income was $19 million and expense was $95 million. Income tax provision was negative $59 million.
Expects to double quad-core Opteron shipments in Q1 over Q4.
Still expects profitability by 2nd half of 2008.
Barcelona quad-core with fixes are coming and samples should be available to customers in 2 to 3 weeks. We have produced 45nm products and expect them to ship in 2nd half of 2008. Fab 36 productivity is great. In 2008 will meet needs of all customers with current fabs.
Notebook unit growth? Seeing notebooks leading growth. From Q3 to Q4 you are seeing shipments for notebooks to be sold in Q1
Quad-core mix (desktop v. server)? 2 to 1. Ratio will increase, heading toward mix of desktops and servers in overall market.
Gross margins from quad-core servers? Will be a plus.
Any profitable segments? Margins are best in server business, then mobile, the lowest is desktop.
Seasonal guidance color? Believes 5 to 10% down sequentially. Graphics has a seasonal downtick, mayber a bit less than processors. We saw good demand in Europe in Q4, just seeing normal seasonality.
Asset light strategy? Not giving details.
Barcelona ramp? We are testing samples of revisions. We will be working closely with our server customers. Systems should be available to customers in Q2. Phenom focus will be getting triple core and low power devices into market.
Gross margin targets? Predicated on new product introductions and 45nm offerings in 2nd half. We need to grow revenues to $2 billion dollar zone to get to gross margin targets.
Operational #1 goal is to return to profitability. Believes that will begin in Q3. But we want to server our customers with what they want and need. We are not going after unit share just for the sake of unit share.
Q1 profitability? Revenue declines hopefully offset by higher margin new products.
SG&A rise in Q4? We did a shutdown in Q4, made people take a vacation, which we won't do in Q1. We also need to ramp 45nm, so there will likely be some growth of SG&A going forward.
Need to replace original quad-core shipments? Mostly no, did agree with some customers to do swaps. Were sold mostly to large clustering installations.
ASP details? Notebook flat; desktop up by mix including quad core; overall lift due to increased server business.
B2 quad-core Opteron problem can be dealt with by a simple Linux kernel fix, which is why it was not a problem for large cluster installations. B2 inventory also goes into desktops. B2 has undergone substantial validation by all our OEMs.
Still hope to do the New York fab, option remains open until 2009.
Macroeconomic or inventory concerns for 2008? We are aware of people's macroeconomic concerns. But need for microprocessors, particularly in emerging makets, is for growth.
Graphics? We are bullish on growing share with our new designs.
Puma platform has more design wins than we have ever seen before. Platform base in 2008 should be broader than 2007.
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Copyright 2007 William P. Meyers