AMD Reports Third Quarter Results

AMD (NYSE:AMD) today reported sales of $1.33 billion, operating income of $119 million, and net income of $134 million, or $0.27 per share, for the quarter ended October 1, 2006. These results include $16.5 million of employee stock-based compensation expense.

In the third quarter of 2005, excluding the Memory Products segment(1), AMD reported sales of $1.01 billion and operating income of $129 million. In the second quarter of 2006, AMD reported sales of $1.22 billion and operating income of $102 million.

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Change

----------------------------------------------------------------------

Q3-06 vs Q3-06 vs

Q3-06 Q2-06 Q3-05(1) Q2-06 Q3-05

----------------------------------------------------------------------

Net Sales

(billions) $1.33 $1.22 $1.01 9% 32%

----------------------------------------------------------------------

Operating

Income

(millions) $119 $102 $129 17% (8)%

----------------------------------------------------------------------

Gross Margin (5.4)% (4.0)%

51.4% 56.8% 55.4% points points

----------------------------------------------------------------------

>>

"Third quarter sales increased nine percent from the prior quarter, and 32 percent year-over-year, due to strong demand for all AMD processor brands," said Robert J. Rivet, AMD's chief financial officer. "Microprocessor unit shipments grew 18 percent sequentially as customers continued leveraging AMD's open platform approach. Demand for AMD Turion(TM) 64 mobile processors was especially strong, resulting in record mobile processor sales and unit shipments coupled with increased average selling prices (ASPs). Record AMD Opteron(TM) processor sales resulted from continued adoption of dual core processors, record unit shipments and improved ASPs."

Desktop processor sales were flat sequentially with increased unit shipments offset by decreased ASPs.

AMD continued to successfully ramp production in both Fab 36 and Chartered Semiconductor. The conversion to 65 nanometer production in Fab 36 is on track, with revenue shipments planned for the fourth quarter.

Third quarter gross margin was 51.4 percent, compared to 56.8 percent in the second quarter of 2006 and 55.4 percent in the third quarter of 2005. The gross margin decrease was largely due to lower desktop processor ASPs which caused a decline in overall processor ASPs.

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ADDITIONAL HIGHLIGHTS

-- AMD and ATI announced plans to join forces to create a processing

powerhouse. The transaction has received all of the required

regulatory and shareholder approvals necessary for close and is

expected to be completed the week of October 23rd.

-- Customer highlights in the third quarter included:

-- Dell launched its first AMD64 processor-based Dimension desktop

systems for consumers and small businesses.

-- Founder, China's second largest PC provider and the seventh

largest global desktop PC provider, announced plans to launch a

full range of AMD64-based desktop, notebook and server systems

throughout China.

-- IBM unveiled five new AMD Opteron-based mainstream server

platforms that are quad-core ready.

-- Commercial adoption of AMD Athlon(TM) 64 processor-based desktop

systems continued, with Acer, HP, Lenovo, and NEC Computers

announcing new AMD-powered platforms. The HP and Lenovo

solutions are their first AMD client systems targeted at large

enterprise customers.

-- More than 150 AMD Turion 64 platforms are shipping or in

development worldwide from the leading PC manufacturers.

-- AMD announced broad support for its Torrenza Initiative by leading

server manufacturers including Cray, Dell, Fujitsu Siemens

Computers, HP, IBM and Sun Microsystems. Torrenza is the

industry's first open x86 innovation platform, capitalizing on the

unique advantages of the AMD's Direct Connect Architecture and

HyperTransport(TM) technology to enable partners to innovate

within a common ecosystem.

-- AMD introduced its next-generation AMD Opteron processor family,

the only x86 server processor with planned upgradeability to

native quad-core within the same thermal design power envelope.

-- More than 60 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

Allianz Group, Linde Group, Merck KGAA, Schering AG, and Quest

Diagnostics. Additionally, government organizations that adopted

AMD64 technology in the quarter include the U.S. Air Force, the

U.S. Department of Census, the U.S. Navy SPAWAR, the Defense

Contract Management Agency, the National Institute of Health, and

the Defense Information Systems Agency (DISA).

-- AMD expanded its global research and development operations,

opening the Shanghai Research and Development Center to drive

next-generation platform innovation and an advanced microprocessor

development facility in Fort Collins, CO named the "Mile High

Design Center."

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CURRENT OUTLOOK

AMD's outlook statements are based on current expectations and exclude ATI operations and ATI acquisition-related charges. The following statements are forward looking, and actual results could differ materially depending on market conditions and the factors set forth under "Cautionary Statement" below.

AMD expects demand for its products to be seasonally strong in the fourth quarter and sales to increase sequentially.

AMD TELECONFERENCE

AMD will hold a conference call for the financial community at 2:30 p.m. PDT today to discuss third quarter financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its Web site at www.amd.com. The webcast will be available for 10 days after the conference call.

ABOUT AMD

Advanced Micro Devices (NYSE:AMD) is a leading global provider of innovative microprocessor solutions for computing, communications and consumer electronics markets. Founded in 1969, AMD is dedicated to delivering superior computing solutions based on customer needs that empower users worldwide. For more information visit www.amd.com.

CAUTIONARY STATEMENT

This release contains forward-looking statements concerning sales for the fourth quarter of 2006, AMD's technology and capacity introduction schedule and the timing of the completion of the planned acquisition of ATI Technologies, Inc, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements in this release involve risks and uncertainties that could cause actual results to differ materially from the company's current expectations. Risks include the possibility that competitors, customers and suppliers of AMD or ATI may take actions that may negate the impact of the anticipated benefits of AMD's acquisition of ATI; revenue, cost savings, growth prospects and any or other synergies expected from the planned acquisition will not be fully realized or will take longer to realize than expected; the planned acquisition will not be accretive as expected; the company will not achieve any year-end or longer-term targeted gross margins, research and development expenses, selling, general or administrative expenses, operating margins, capital structure or debt-to-capitalization ratio; there will be delays associated with integrating the companies, including employees and operations, after the planned acquisition is completed; goodwill and other long-lived assets resulting from the planned acquisition and the resulting impact on the company's assets and earnings will be impaired; global business and economic conditions will worsen, resulting in lower than currently expected sales in the fourth quarter of 2006 and beyond; Intel Corporation's pricing, marketing programs, product bundling, new product introductions or other activities targeting the company's business will prevent attainment of the company's current sales plans; demand for computers and, in turn, demand for the company's products will be lower than currently expected; the company will not achieve its current product and technology introduction schedules; the company will require additional capital and will not be able to raise sufficient capital, on favorable terms or at all; the company will not be able to obtain sufficient manufacturing capacity or components to meet demand for its products; solutions providers will not provide the infrastructure to support the company's AMD64 technology in a timely fashion; and unfavorable results of operations of Spansion will adversely impact the company's results of operations. We urge investors to review in detail the risks and uncertainties in the company's Securities and Exchange Commission filings, including but not limited to the Annual Report on From 10-K for the year ended December 25, 2005 and AMD's quarterly report on Form 10-Q for the quarter ended July 2, 2006.

AMD, the AMD Arrow logo, AMD Athlon, AMD Opteron, AMD Turion, and combinations thereof are trademarks of Advanced Micro Devices, Inc. Spansion is a trademark of Spansion, Inc. Other names used are for identification purposes only and may be trademarks of their respective owners.

(1) As a result of Spansion Inc.'s initial public offering (IPO) in December 2005, financial results for periods in 2006 compared to periods in 2005 do not correlate directly. In this press release, all references to and comparisons with periods in 2005 exclude the results of the company's former Memory Products segment.

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Advanced Micro Devices, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands except per share amounts)

Quarter Ended

---------------------------------------------------------------------

Oct. 1, Jul. 2, Sept. 25,

2006 2006 2005

(Unaudited) (Unaudited) (Unaudited)

---------------------------------------------------------------------

Net sales $1,327,622 $1,216,367 $1,522,755

Cost of sales (includes stock-

based compensation expense of

$1,932 for Q3 FY'06; $2,200 for

Q2 FY'06 and $0 for Q3 FY'05;

$5,920 for nine months ended

Oct. 1, 2006 and $0 for nine

months ended Sept. 25, 2005) 645,264 526,059 896,261

---------------------------------------------------------------------

Gross margin 682,358 690,308 626,494

Gross margin % 51.4% 56.8% 41.1%

Research and development

(includes stock-based

compensation expense of $6,110

for Q3 FY'06; $6,834 for Q2

FY'06 and $0 for Q3 FY'05;

$17,039 for nine months ended

Oct. 1, 2006 and $0 for nine

months ended Sept. 25, 2005) 277,380 278,674 289,018

Marketing, general and

administrative (includes stock-

based compensation expense of

$8,468 for Q3 FY'06; $9,020 for

Q2 FY'06; $ 277 for Q3 FY'05;

$26,650 for nine months ended

Oct. 1, 2006 and $743 for nine

months ended Sept. 25, 2005) 285,806 309,525 258,748

---------------------------------------------------------------------

Operating income 119,172 102,109 78,728

Interest income 31,188 35,308 9,510

Interest expense (17,637) (17,859) (30,615)

Other income (expense), net (1,975) 7,240 (3,456)

---------------------------------------------------------------------

Income (loss) before minority

interest, equity in net loss of

Spansion Inc. and income taxes 130,748 126,798 54,167

Minority interest of consolidated

subsidiaries (6,941) (7,183) 21,227

Equity in net loss of Spansion

Inc. (10,204) (12,467) -

Provision (benefit) for income

taxes (20,852) 18,301 (606)

---------------------------------------------------------------------

Net income $ 134,455 $ 88,847 $ 76,000

---------------------------------------------------------------------

Net income per common share

Basic $ 0.28 $ 0.18 $ 0.19

Diluted $ 0.27 $ 0.18 $ 0.18

---------------------------------------------------------------------

Shares used in per share

calculation

Basic 486,331 484,541 399,025

Diluted 496,772 500,176 443,681

Nine Months Ended

----------------------------------------------------------------------

Oct. 1, Sept. 25,

2006 2005

(Unaudited) (Unaudited)

----------------------------------------------------------------------

Net sales $3,876,147 $4,009,301

Cost of sales (includes stock-based

compensation expense of $1,932 for Q3 FY'06;

$2,200 for Q2 FY'06 and $0 for Q3 FY'05;

$5,920 for nine months ended Oct. 1, 2006 and

$0 for nine months ended Sept. 25, 2005) 1,724,663 2,469,663

----------------------------------------------------------------------

Gross margin 2,151,484 1,539,638

Gross margin % 55.5% 38.4%

Research and development (includes stock-based

compensation expense of $6,110 for Q3 FY'06;

$6,834 for Q2 FY'06 and $0 for Q3 FY'05;

$17,039 for nine months ended Oct. 1, 2006

and $0 for nine months ended Sept. 25, 2005) 820,230 814,724

Marketing, general and administrative

(includes stock-based compensation expense of

$8,468 for Q3 FY'06; $9,020 for Q2 FY'06; $

277 for Q3 FY'05; $26,650 for nine months

ended Oct. 1, 2006 and $743 for nine months

ended Sept. 25, 2005) 851,373 698,974

----------------------------------------------------------------------

Operating income 479,881 25,940

Interest income 94,658 23,589

Interest expense (58,743) (80,513)

Other income (expense), net (13,863) (10,463)

----------------------------------------------------------------------

Income (loss) before minority interest, equity

in net loss of Spansion Inc. and income taxes 501,933 (41,447)

Minority interest of consolidated subsidiaries (20,471) 105,985

Equity in net loss of Spansion Inc. (40,914) -

Provision (benefit) for income taxes 32,722 (5,358)

----------------------------------------------------------------------

Net income $ 407,826 $ 69,896

----------------------------------------------------------------------

Net income per common share

Basic $ 0.85 $ 0.18

Diluted $ 0.82 $ 0.17

----------------------------------------------------------------------

Shares used in per share calculation

Basic 478,318 395,839

Diluted 497,332 409,586

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Advanced Micro Devices, Inc.

CONSOLIDATED BALANCE SHEETS

(Thousands)

Oct. 1, Jul. 2, Dec. 25,

2006 2006 2005(a)

(Unaudited) (Unaudited)

----------------------------------------------------------------------

Assets

Current assets:

Cash, cash equivalents and

marketable securities $2,356,903 $2,530,062 $1,794,766

Accounts receivable, net 688,023 571,539 805,531

Inventories 465,716 405,285 388,631

Prepaid expenses and other

current assets 326,238 308,323 477,302

Deferred income taxes 74,981 90,323 92,606

----------------------------------------------------------------------

Total current assets 3,911,861 3,905,532 3,558,836

Property, plant and equipment, net 3,403,878 3,163,181 2,701,000

Net investment in Spansion Inc. 671,249 686,984 721,342

Other assets 392,255 306,198 306,601

----------------------------------------------------------------------

Total Assets $8,379,243 $8,061,895 $7,287,779

----------------------------------------------------------------------

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable 901,349 706,454 855,834

Accrued compensation and benefits 147,250 161,547 226,874

Accrued liabilities 473,477 429,843 388,998

Income taxes payable 17,790 45,567 3,326

Deferred income on shipments to

distributors 115,571 189,992 141,898

Current portion of long-term debt

and capital lease obligations 44,950 45,139 43,224

Other current liabilities 191,824 175,947 161,807

----------------------------------------------------------------------

Total current liabilities 1,892,211 1,754,489 1,821,961

Deferred income taxes 75,861 90,323 92,606

Long-term debt and capital lease

obligations 644,357 647,109 1,327,065

Other long-term liabilities 482,204 450,289 459,322

Minority interest in consolidated

subsidiaries 272,116 267,095 234,988

Stockholders' equity:

Capital stock:

Common stock, par value 4,870 4,856 4,355

Capital in excess of par value 3,958,680 3,921,784 2,710,168

Retained earnings 881,631 747,160 473,678

Accumulated other comprehensive

income 167,313 178,790 163,636

----------------------------------------------------------------------

Total stockholders' equity 5,012,494 4,852,590 3,351,837

----------------------------------------------------------------------

Total Liabilities and

Stockholders' Equity $8,379,243 $8,061,895 $7,287,779

----------------------------------------------------------------------

(a)Derived from the December 25, 2005 audited financial statements of

Advanced Micro Devices, Inc.

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Advanced Micro Devices, Inc.

SELECTED CORPORATE DATA

(Unaudited)

(Millions except headcount and percentages)

Quarter Ended Nine Months Ended

--------------------------------------------------- ------------------

Oct. 1, Jul. 2, Sept. 25, Oct. 1, Sept. 25,

Segment Information (6) 2006 2006 2005 2006 2005

-----------------------

--------------------------------------------------- ------------------

Computation Products

(2)

Net sales $ 1,290 $ 1,172 $ 969 $ 3,761 $ 2,486

Operating income 133 113 149 531 331

Embedded Products (3)

Net sales 38 44 35 120 95

Operating loss (1) (6) (14) (18) (40)

All Other (4)

Net sales - - 3 (5) 3

Operating loss (13) (5) (6) (33) (16)

Subtotal (excluding

Memory Products

segment)

Net sales 1,328 1,216 1,007 3,876 2,584

Operating income 119 102 129 480 275

Memory Products (5)

Net sales - - 516 - 1,425

Operating loss - - (50) - (249)

Total AMD

Net sales 1,328 1,216 1,523 3,876 4,009

Operating income 119 102 79 480 26

--------------------------------------------------- ------------------

Other Data (AMD excluding Memory

Products segment)

---------------------------------

Gross margin % 51.4% 56.8% 55.4% 55.5% 55.4%

Research and

development expenses $ 277 $ 279 $ 216 $ 820 $ 598

Marketing, general and

administrative

expenses $ 286 $ 310 $ 214 $ 851 $ 559

Depreciation &

amortization $ 200 $ 193 $ 154 $ 567 $ 515

Capital additions $ 425 $ 455 $ 177 $ 1,190 $ 859

Headcount 11,609 10,967 9,530 11,609 9,530

International sales % 70.9% 70.2% 72.5% 70.2% 70.7%

--------------------------------------------------- ------------------

EBITDA (1) $ 331 $ 318 $ 397 $ 1,066 $ 1,087

-----------------------

--------------------------------------------------- ------------------

(1)RECONCILIATION OF NET INCOME TO EBITDA(a)

Net income $ 134 $ 89 $ 76 $ 408 $ 70

Depreciation and

amortization 200 193 291 567 942

Interest expense 18 18 31 59 81

Provision (benefit)

for income taxes (21) 18 (1) 33 (5)

------------------------------------------------ ------------------

EBITDA $ 331 $ 318 $ 397 $ 1,066 $ 1,087

(a)Starting Q106, the Company defines EBITDA as net income adjusted

for interest expense, tax, depreciation and amortization.

Prior period information has been restated to conform to current

period presentation.

(2)Computation Products segment includes PC processors and Chipsets.

(3)Embedded Products segment, formerly known as Personal Connectivity

Solution Products, includes Embedded Processors and Products for

global commercial and consumer markets.

(4)The All Other category includes certain operating expenses and

credits that are not allocated to the operating segments and,

starting Q305, includes Personal Internet Communicator (PIC)

products.

(5)Memory Products segment included Flash memory products of AMD and

Spansion. Spansion closed its IPO on Dec 21, 2005. Since that

time, AMD uses the equity method of accounting to reflect its

proportionate share of Spansion's net income (loss).

(6)Starting Q405, the Company allocates bonus and profit sharing

expenses to the segments. Prior period information has been

restated to conform to current period presentation.

Note: Figures may not foot due to rounding

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For further information: AMD Dave Kroll, 408-749-3310 (Editorial) dave.kroll@amd.com Mike Haase, 408-749-3124 (Investors) mike.haase@amd.com Ruth Cotter, 408-749-3887 (Investors) ruth.cotter@amd.com

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