10-QPeriod: Q1 FY2012

ADVANCED MICRO DEVICES INC Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 9, 2012For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported a net loss of $590 million for the quarter ended March 31, 2012, a significant shift from the $510 million net income in the prior year's comparable quarter. This downturn was heavily influenced by a substantial $703 million charge related to a "limited waiver of exclusivity" from GLOBALFOUNDRIES Inc. (GF). Excluding this one-time charge, AMD's adjusted gross margin would have been 46%, indicating a stronger underlying performance. Operationally, net revenue decreased slightly by 2% year-over-year to $1.59 billion. The company completed the acquisition of SeaMicro, Inc. for $312 million to bolster its server technology strategy. Despite the reported loss, AMD generated positive operating cash flow of $107 million, demonstrating some operational resilience.

Financial Highlights

54 data points
Beta

Revenue

$1.58B

1.7% Gross Margin

Net Income

-$590.00M

-37.2% Net Margin

EPS (Diluted)

$-0.80

Total Assets

$4.99B

Cash & Equivalents

$1.19B

Free Cash Flow

$67.00M

Financial Statements
Beta
Revenue$1.58B
Cost of Revenue$1.56B
Gross Profit$27.00M
R&D Expenses$368.00M
SG&A Expenses$230.00M
Operating Income-$580.00M
Interest Expense$43.00M
Net Income-$590.00M
EPS (Basic)$-0.80
EPS (Diluted)$-0.80
Shares Outstanding (Basic)734.00M
Shares Outstanding (Diluted)734.00M

Key Highlights

  • 1Reported a net loss of $590 million, compared to a net income of $510 million in the prior year's quarter, largely due to a $703 million charge from GLOBALFOUNDRIES.
  • 2Net revenue for the quarter was $1.59 billion, a slight decrease of 2% year-over-year.
  • 3Acquired SeaMicro, Inc. for $312 million to enhance its server technology offerings.
  • 4Operating cash flow was positive at $107 million, indicating cash generation from core operations.
  • 5The company experienced a significant drop in gross margin to 2% from 43% year-over-year, primarily due to the aforementioned GLOBALFOUNDRIES charge.
  • 6Total assets remained relatively stable at $4.99 billion, with a notable increase in goodwill to $553 million, largely from the SeaMicro acquisition.
  • 7Cash, cash equivalents, and marketable securities decreased to $1.54 billion from $1.76 billion at the end of the previous quarter.

Frequently Asked Questions

The primary driver of the net loss of $590 million was a substantial charge of $703 million related to a 'limited waiver of exclusivity' from GLOBALFOUNDRIES Inc. This charge consisted of a $425 million cash payment and a $278 million non-cash charge for the fair value of transferred GF capital stock. Excluding this one-time item, the company's financial performance would have been considerably different.

AMD acquired SeaMicro, Inc. for $312 million in cash and stock to strengthen its server technology strategy. The acquisition contributed $19 million in cash acquired, $24 million in tangible assets, $109 million in identified intangible assets (including $86 million in developed technology), and $230 million in goodwill. The results of SeaMicro were included in AMD's consolidated financial statements from the acquisition date but were not material to the overall reported results for the quarter.

As of March 31, 2012, AMD had $1.54 billion in cash, cash equivalents, and marketable securities. The company generated $107 million in net cash from operating activities. Management believes that its current cash position, anticipated cash flow from operations, and available external financing will be sufficient to fund its operations, capital expenditures, and debt repayment over the next twelve months.

The second amendment to the WSA modifies pricing terms for 2012 and establishes a framework for 2013 pricing. It involves a commitment from GF to provide a fixed number of production wafers and a commitment from AMD to purchase them at fixed prices. The amendment also granted AMD rights to contract with other foundries in exchange for a $425 million payment and the transfer of AMD's GF capital stock. AMD estimates it will pay GF approximately $1.5 billion in 2012 for wafer purchases.