01—Abstract
Summary
Summary of the 10-K filed February 19, 2010. Cited figures are marked; the original filing is the authoritative source.
Advanced Micro Devices, Inc. (AMD) filed its 2010 10-K report detailing its financial performance and strategic direction for the fiscal year ending December 25, 2009.
A significant event for AMD during this period was the formation of GLOBALFOUNDRIES, Inc. (GF), a manufacturing joint venture with ATIC and WCH, aimed at optimizing its manufacturing operations. AMD also achieved a pivotal legal victory by settling its long-standing antitrust litigation with Intel, which included a substantial $1.25 billiona payment to AMD and a new cross-licensing agreement. Financially, AMD reported a net revenue of $5.4 billion for 2009, a decrease from the previous year, largely attributed to lower average selling prices amidst challenging macroeconomic conditions.
However, the company demonstrated improved operational performance, reporting operating income compared to a significant operating loss in 2008, bolstered by the Intel settlement and cost reduction initiatives. The company ended the year with a strengthened cash position, driven by the GF transaction proceeds and the Intel settlement payment.
02—Key points
Key Highlights
- Formation of GLOBALFOUNDRIES (GF) joint venture to manage manufacturing operations, with ATIC becoming the majority owner.
- Settlement of antitrust litigation with Intel, resulting in a $1.25 billion payment to AMD and a 5-year patent cross-license agreement.
- Net revenue decreased by 7% to $5.4 billion, primarily due to lower average selling prices in the Computing Solutions segment.
- Operating income of $664 million, a significant improvement from an operating loss of $1.96 billion in 2008, largely due to the Intel settlement and cost-saving measures.
- Year-end cash, cash equivalents, and marketable securities increased to $2.7 billion, bolstered by proceeds from the GF transaction and the Intel settlement.
- Significant debt reduction efforts were undertaken, with approximately $1.2 billion in debt reduced (excluding GF's debt).
- Planned deconsolidation of GLOBALFOUNDRIES in Q1 2010, shifting to the equity method of accounting for GF.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Advanced Micro Devices Inc kept $0.06.
- Revenue$5.40B100.0%
- Cost of revenue−$3.13B57.9%
- Gross profit$2.27B42.1%
- Operating costs−$1.61B29.8%
- Operating income$664.0M12.3%
- Interest, other & tax−$360.0M6.7%
- Net income$304.0M5.6%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 19, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $5.40B$5.81B | −7.0% |
| Cost of Revenue | $3.13B$3.49B | −10.2% |
| Gross Profit | $2.27B$2.32B | −2.1% |
| R&D Expenses | $1.72B$1.85B | −6.9% |
| SG&A Expenses | $994.00M$1.30B | −23.8% |
| Operating Income | $664.00M-$1.96B | +134.0% |
| Interest Expense | $438.00M$391.00M | +12.0% |
| Net Income | $304.00M-$3.13B | +109.7% |
| EPS (Basic) | $0.46$-5.15 | +108.9% |
| EPS (Diluted) | $0.45$-5.15 | +108.7% |
| Shares Outstanding (Basic) | 673.00M607.00M | +10.9% |
| Shares Outstanding (Diluted) | 678.00M607.00M | +11.7% |
05—Questions
Frequently Asked Questions
What was the financial performance of AMD in the fiscal year ending December 25, 2009?
AMD reported net revenue of $5.4 billion for fiscal year 2009, a decrease from $5.8 billion in 2008. The company reported an operating income of $664 million, a substantial improvement from an operating loss of $1.96 billion in 2008. This turnaround was significantly influenced by the $1.25 billion settlement received from Intel and ongoing cost reduction efforts.
What were the key strategic moves made by AMD during this period?
The most significant strategic move was the formation of GLOBALFOUNDRIES, Inc. (GF), a manufacturing joint venture with ATIC, which transferred AMD's manufacturing assets. This aims to reduce capital-intensive manufacturing burdens. Additionally, AMD settled its long-standing antitrust litigation with Intel, securing a substantial financial settlement and a crucial patent cross-license agreement that provides greater operational flexibility.
How did the formation of GLOBALFOUNDRIES impact AMD's financial reporting?
AMD formed GLOBALFOUNDRIES as a manufacturing joint venture and consolidated its results from March 2, 2009, through December 26, 2009. However, due to changes in governance and accounting standards, AMD planned to deconsolidate GF starting in fiscal year 2010, moving to the equity method of accounting. This deconsolidation is expected to lead to higher reported cost of sales and lower operating expenses, as well as significantly lower interest expense due to GF's debt no longer being consolidated.
What is the outlook for AMD's business based on this report?
The report highlights AMD's strategic shift towards a fabless semiconductor design model, leveraging its technology portfolio in microprocessors and graphics. The settlement with Intel provides a cleaner competitive landscape and financial resources. The company expects improved demand in the second half of 2009 to continue into 2010, driven by new product introductions and an improving macroeconomic environment. The deconsolidation of GF is also a key factor shaping future financial reporting and operations.
06—Continue