Advanced Micro Devices' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Advanced Micro Devices (AMD)

Q1 2012 Earnings Call

April 19, 2012 5:00 pm ET


Ruth Cotter - Director

Rory P. Read - Chief Executive Officer, President, Interim Chief Sales Officer and Member of The Board of Directors

Thomas Seifert - Chief Financial officer, Principal Accounting officer and Senior Vice President


Sanjay Chaurasia - Nomura Securities Co. Ltd., Research Division

Uche X. Orji - UBS Investment Bank, Research Division

Patrick Walsh

Glen Yeung - Citigroup Inc, Research Division

Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

JoAnne Feeney - Longbow Research LLC

Christopher Caso - Susquehanna Financial Group, LLLP, Research Division

Mark Lipacis - Jefferies & Company, Inc., Research Division

Cody G. Acree - Williams Financial Group, Inc., Research Division

David M. Wong - Wells Fargo Securities, LLC, Research Division

Hans C. Mosesmann - Raymond James & Associates, Inc., Research Division

Patrick Wang - Evercore Partners Inc., Research Division

Dean Grumlose - Stifel, Nicolaus & Co., Inc., Research Division



Good afternoon. My name is Huey, and I'll be your conference operator for today. At this time, I'd like to welcome everyone to AMD's First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today.

I would now like to turn the call over to Ms. Ruth Cotter, Vice President of Investor Relations for AMD. Please go ahead.

Ruth Cotter

Thank you, and welcome to AMD's First Quarter Earnings Conference Call. By now, you should have had the opportunity to review a copy of our earnings release and the CFO commentary. If you've not reviewed these documents, they can be found on AMD's website at

The participants on our call today are Rory Read, President and Chief Executive Officer; and Thomas Seifert, our Senior Vice President and Chief Financial Officer of AMD. This is a live call and it will be replayed via webcast on The replay will be available for the next 10 days starting later this evening.

Before we begin today, I'd like to highlight a few dates of interest for you. Mark Papermaster, our Senior Vice President and Chief Technology Officer, will present at the Jefferies Global Media and Telecom Conference on May 7 in New York. Thomas Seifert will present at the Bank of America Merrill Lynch Technology Conference in San Francisco on the 8th of May. Rory Read will present at the JPMorgan Technology, Media and Telecom Conference in Boston on May 15. And our second quarter quiet time will begin the close of business on Friday, June 15.

Lastly, we intend to announce our second quarter earnings on July 19.

As a result of the 2012 amendment to the Wafer Supply Agreement with GLOBALFOUNDRIES, as of March 5, 2012, AMD no longer has equity ownership in GLOBALFOUNDRIES.

I'd like to take this opportunity to remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it. Those statements are based on current beliefs, assumptions and expectations, speak only as of the current date, and as such, includes risks and uncertainties that could cause actual results to differ materially from our current expectations. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially from our current expectations. You'll also find detailed discussions about such risk factors in our filings with the SEC, and in particular, AMD's annual report on Form 10-K for the year ended December 31, 2011. Finally, any non-GAAP financial measures or references on this call are reconciled in the CFO-written commentary posted on our website.

Now with that, I'd like to hand the call over to Rory. Rory?

Rory P. Read

Thank you, Ruth. Q1 was a solid quarter for AMD. We made good progress improving our execution, becoming more consistent and building trust with our customers and partners. We have taken steps to position the company to seize the opportunities in front of us, both in the high-growth markets and in the product categories, where our innovative technology provides us with leadership opportunities.

Our improved execution resulted in better-than-expected revenue of $1.59 billion for the seasonally down first quarter, a 6% sequential decrease and a 2% decrease year-over-year. First quarter non-GAAP income was $92 million. This is a 64% improvement from the year-ago period, which was driven by gross margin improvements resulting from a richer product mix and operational efficiencies.

A steady supply of 32-nanometer products allowed us to meet our customer commitment in the quarter. Consistent execution that builds trust with our customers remains the fundamental part of our near-term growth strategy. We are also pleased with our 28-nanometer graphics product ramp. We met our new product introduction commitments in the quarter and we are now the only company offering a top-to-bottom family of 28-nanometer discrete desktop GPU offerings. Customer demand for these industry-leading graphic products is strong.

Adoption of our APUs continues to accelerate. APUs account for nearly 100% of our mobile unit shipments in the quarter, helping drive an approximate 30% increase in mobile processor unit shipments and significant mobile revenue growth from a year ago.

We saw a strong success in the critical 400 to 700 mainstream retail notebook price band, which accounts for nearly 50% of all notebooks sold in retail in 2011. For example, the best-selling premium notebook SKU of the first quarter at Best Buy was in fact powered by our AMD AA APU.

Our next-generation Trinity APU for mainstream notebook extends our leadership opportunity in this large and growing price band. Trinity improves on virtually every aspect of our current A-Series APUs while doubling the performance per watt. By integrating a discrete level GPU into the die, Trinity enables outstanding video and gaming experiences with superior battery life. Trinity is a great value, excelling at running the types of software increasingly used by our consumers buying these mainstream notebooks. We are successfully ramping production of Trinity APUs as customers prepared to launch a record number of AMD notebook designs beginning this quarter.

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