10-KPeriod: FY2009

ADVANCED MICRO DEVICES INC Annual Report, Year Ended Dec 26, 2009

Filed February 19, 2010For Securities:AMD

Summary

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 billion 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.

Financial Highlights

53 data points
Beta

Revenue

$5.40B

42.1% Gross Margin

Net Income

$304.00M

5.6% Net Margin

EPS (Diluted)

$0.45

Total Assets

$9.08B

Cash & Equivalents

$1.66B

Free Cash Flow

$7.00M

Financial Statements
Beta
Revenue$5.40B
Cost of Revenue$3.13B
Gross Profit$2.27B
R&D Expenses$1.72B
SG&A Expenses$994.00M
Operating Income$664.00M
Interest Expense$438.00M
Net Income$304.00M
EPS (Basic)$0.46
EPS (Diluted)$0.45
Shares Outstanding (Basic)673.00M
Shares Outstanding (Diluted)678.00M

Key Highlights

  • 1Formation of GLOBALFOUNDRIES (GF) joint venture to manage manufacturing operations, with ATIC becoming the majority owner.
  • 2Settlement of antitrust litigation with Intel, resulting in a $1.25 billion payment to AMD and a 5-year patent cross-license agreement.
  • 3Net revenue decreased by 7% to $5.4 billion, primarily due to lower average selling prices in the Computing Solutions segment.
  • 4Operating 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.
  • 5Year-end cash, cash equivalents, and marketable securities increased to $2.7 billion, bolstered by proceeds from the GF transaction and the Intel settlement.
  • 6Significant debt reduction efforts were undertaken, with approximately $1.2 billion in debt reduced (excluding GF's debt).
  • 7Planned deconsolidation of GLOBALFOUNDRIES in Q1 2010, shifting to the equity method of accounting for GF.

Frequently Asked Questions

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.

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.

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.

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.