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AMD Reports 53 Percent Growth Driven by Record Adoption of Opteron
In the second quarter of 2005, excluding the Memory Products segment, AMD reported sales of $797 million and operating income of $83 million. In the first quarter of 2006, AMD reported sales of $1.33 billion and operating income of $259 million. 
Change
---------------------------------------------------------------------- Q2-06 Q1-06 Q2-05(1) Q2-06 vs Q1-06 Q2-06 vs Q2-05
----------------------------------------------------------------------
Net Sales (billions) $1.22 $1.33 $.80 (8.7)% 52.6%
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Operating Income (millions) $102 $259 $83 (60.6)% 22.9%
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Gross Margin 56.8% 58.5% 58.0% (1.7)% points (1.2)% points
---------------------------------------------------------------------- "While we achieved 53 percent year-over-year sales growth and recorded our twelfth consecutive quarter of greater than 20 percent year-over-year microprocessor sales growth, we are dissatisfied by not reaching our second quarter sales target," said Robert J. Rivet, AMD's chief financial officer. "We are particularly pleased with the continued adoption of AMD solutions in the commercial segment. In particular, AMD Opteron processor sales grew 26 percent sequentially and we believe we gained server processor market share in the quarter. Sales to our largest global customers grew quarter-over-quarter as we continued to successfully execute our strategy. Sales through the distribution channel were down, primarily because we chose not to participate in certain deeply-discounted opportunities. "Second quarter manufacturing execution was outstanding, with Fab 36 ramping 300mm capacity aggressively at mature yields. In addition, Chartered Semiconductor is now in production of AMD products." Second quarter sales were down from the prior quarter primarily due to the challenging pricing environment for high-volume desktop processors which negatively impacted average selling prices (ASPs). Total microprocessor unit shipments were down four percent sequentially. Record AMD Opteron processor sales were driven by growing demand for single- and multi-socket server and workstation solutions. AMD Opteron processor unit shipments experienced double digit percentage growth quarter-over-quarter, and the sequential ASP percentage increase was in the single digits. Second quarter gross margin was 56.8 percent, compared to 58.5 percent in the first quarter of 2006. The gross margin decrease was largely due to lower desktop processor ASPs. Operating income was $102 million in the second quarter, up from $83 million in the second quarter of 2005 and down from $259 million in the first quarter of 2006. The decline in operating income from the prior quarter was due largely to lower sales and increased operating expenses related to an extra week of operations in the quarter, and marketing expenses in support of the company's long-term goals to acquire new customers, expand business with existing customers, and increase commercial sales. ADDITIONAL HIGHLIGHTS -- AMD expanded its footprint by adding new customers and increasing the number of platforms with existing customers. -- Dell announced plans to offer Dual-Core AMD Opteron processor-based servers by the end of the year. -- Lenovo announced plans to offer AMD-powered ThinkCentre commercial desktops. -- Fujitsu Siemens Computers launched two new commercial offerings, an AMD Athlon 64 processor-based Esprimo desktop system and a thin client powered by an AMD Geode processor. -- Sun Microsystems introduced a new AMD Geode processor-based commercial thin client. -- Semp Toshiba, the second largest OEM in Brazil, began offering AMD-based desktop systems. -- Tsinghua Tongfang, China's third largest computer manufacturer and the second largest home PC brand in China, launched its first AMD-powered mobile solutions in China. -- AMD continued its momentum in the mobile market, securing more than twice the AMD Turion 64 X2 mobile design wins at launch as compared to the original AMD Turion 64 launch. -- AMD detailed its "Torrenza" initiative to accelerate industry-wide innovation on the AMD64 platform. Torrenza represents the industry's first open x86 innovation platform, capitalizing on the unique advantages of the Direct Connect Architecture and HyperTransport. Torrenza will enable partners to innovate within a common ecosystem. -- More than 90 percent of the top 100 and more than 55 percent of the top 500 of the Forbes Global 2000 companies or their subsidiaries are using AMD64 technology. Companies that have recently joined these growing ranks include CDW Corporation, Reliance Industries, Sanofi-Aventis, and Toyota, among others. -- AMD Opteron processor-based systems represent the fastest growing platform on the Top500 Supercomputing list, with 81 AMD Opteron processor-based systems now on the list as reported by the TOP500 Organization. -- AMD announced plans to flexibly expand its manufacturing operations, including converting Fab 30 from 200mm to 300mm production, expanding production capacity at Fab 36, and accelerating the transition to 45nm production within 18 months of initial 65nm production. AMD also received a non-binding $900 million cash incentive package consisting of grants and tax credits from the State of New York to build its next fabrication facility in Luther Forest, NY. -- AMD, APC, Cadence Design Systems, Dell, Egenera, HP, IBM, Rackable Systems, SprayCool, Sun Microsystems, VMWare and other industry leaders initiated the formation of the Green Grid Alliance to share best practices to reduce power consumption in datacenters and raise awareness around critical energy optimization of datacenter management. -- AMD continued to enhance performance in the award-winning AMD Athlon 64 processor family, including the launch of the AMD Athlon 64 FX 62 and the AMD Athlon 64 X2 5000+. AMD also announced a new line of energy-efficient desktop products delivering smaller, quieter, and more innovative PC designs. -- AMD and Microsoft announced an agreement to jointly support flexible business models for emerging markets powered by Microsoft FlexGo technology. The pay-as-you-go computing model allows customers to have a fully-featured PC by paying only for the time they use it. CURRENT OUTLOOK AMD's outlook statements are based on current expectations. The following statements are forward looking, and actual results could differ materially depending on market conditions. AMD expects demand for its products to be seasonally strong in the second half of 2006, and we expect third quarter sales to increase sequentially.
Change
---------------------------------------------------------------------- Q2-06 Q1-06 Q2-05(1) Q2-06 vs Q1-06 Q2-06 vs Q2-05
----------------------------------------------------------------------
Net Sales (billions) $1.22 $1.33 $.80 (8.7)% 52.6%
----------------------------------------------------------------------
Operating Income (millions) $102 $259 $83 (60.6)% 22.9%
----------------------------------------------------------------------
Gross Margin 56.8% 58.5% 58.0% (1.7)% points (1.2)% points
---------------------------------------------------------------------- "While we achieved 53 percent year-over-year sales growth and recorded our twelfth consecutive quarter of greater than 20 percent year-over-year microprocessor sales growth, we are dissatisfied by not reaching our second quarter sales target," said Robert J. Rivet, AMD's chief financial officer. "We are particularly pleased with the continued adoption of AMD solutions in the commercial segment. In particular, AMD Opteron processor sales grew 26 percent sequentially and we believe we gained server processor market share in the quarter. Sales to our largest global customers grew quarter-over-quarter as we continued to successfully execute our strategy. Sales through the distribution channel were down, primarily because we chose not to participate in certain deeply-discounted opportunities. "Second quarter manufacturing execution was outstanding, with Fab 36 ramping 300mm capacity aggressively at mature yields. In addition, Chartered Semiconductor is now in production of AMD products." Second quarter sales were down from the prior quarter primarily due to the challenging pricing environment for high-volume desktop processors which negatively impacted average selling prices (ASPs). Total microprocessor unit shipments were down four percent sequentially. Record AMD Opteron processor sales were driven by growing demand for single- and multi-socket server and workstation solutions. AMD Opteron processor unit shipments experienced double digit percentage growth quarter-over-quarter, and the sequential ASP percentage increase was in the single digits. Second quarter gross margin was 56.8 percent, compared to 58.5 percent in the first quarter of 2006. The gross margin decrease was largely due to lower desktop processor ASPs. Operating income was $102 million in the second quarter, up from $83 million in the second quarter of 2005 and down from $259 million in the first quarter of 2006. The decline in operating income from the prior quarter was due largely to lower sales and increased operating expenses related to an extra week of operations in the quarter, and marketing expenses in support of the company's long-term goals to acquire new customers, expand business with existing customers, and increase commercial sales. ADDITIONAL HIGHLIGHTS -- AMD expanded its footprint by adding new customers and increasing the number of platforms with existing customers. -- Dell announced plans to offer Dual-Core AMD Opteron processor-based servers by the end of the year. -- Lenovo announced plans to offer AMD-powered ThinkCentre commercial desktops. -- Fujitsu Siemens Computers launched two new commercial offerings, an AMD Athlon 64 processor-based Esprimo desktop system and a thin client powered by an AMD Geode processor. -- Sun Microsystems introduced a new AMD Geode processor-based commercial thin client. -- Semp Toshiba, the second largest OEM in Brazil, began offering AMD-based desktop systems. -- Tsinghua Tongfang, China's third largest computer manufacturer and the second largest home PC brand in China, launched its first AMD-powered mobile solutions in China. -- AMD continued its momentum in the mobile market, securing more than twice the AMD Turion 64 X2 mobile design wins at launch as compared to the original AMD Turion 64 launch. -- AMD detailed its "Torrenza" initiative to accelerate industry-wide innovation on the AMD64 platform. Torrenza represents the industry's first open x86 innovation platform, capitalizing on the unique advantages of the Direct Connect Architecture and HyperTransport. Torrenza will enable partners to innovate within a common ecosystem. -- More than 90 percent of the top 100 and more than 55 percent of the top 500 of the Forbes Global 2000 companies or their subsidiaries are using AMD64 technology. Companies that have recently joined these growing ranks include CDW Corporation, Reliance Industries, Sanofi-Aventis, and Toyota, among others. -- AMD Opteron processor-based systems represent the fastest growing platform on the Top500 Supercomputing list, with 81 AMD Opteron processor-based systems now on the list as reported by the TOP500 Organization. -- AMD announced plans to flexibly expand its manufacturing operations, including converting Fab 30 from 200mm to 300mm production, expanding production capacity at Fab 36, and accelerating the transition to 45nm production within 18 months of initial 65nm production. AMD also received a non-binding $900 million cash incentive package consisting of grants and tax credits from the State of New York to build its next fabrication facility in Luther Forest, NY. -- AMD, APC, Cadence Design Systems, Dell, Egenera, HP, IBM, Rackable Systems, SprayCool, Sun Microsystems, VMWare and other industry leaders initiated the formation of the Green Grid Alliance to share best practices to reduce power consumption in datacenters and raise awareness around critical energy optimization of datacenter management. -- AMD continued to enhance performance in the award-winning AMD Athlon 64 processor family, including the launch of the AMD Athlon 64 FX 62 and the AMD Athlon 64 X2 5000+. AMD also announced a new line of energy-efficient desktop products delivering smaller, quieter, and more innovative PC designs. -- AMD and Microsoft announced an agreement to jointly support flexible business models for emerging markets powered by Microsoft FlexGo technology. The pay-as-you-go computing model allows customers to have a fully-featured PC by paying only for the time they use it. CURRENT OUTLOOK AMD's outlook statements are based on current expectations. The following statements are forward looking, and actual results could differ materially depending on market conditions. AMD expects demand for its products to be seasonally strong in the second half of 2006, and we expect third quarter sales to increase sequentially.