Well executed 3rd quarter in challenging environment.  Reached operational profitability.  Launched Radeon, Turion, and quad core products in Q3.  Excited about asset smart. 

Growing Phenom and business class solutions brought ASPs up.  143 million in CPU revenue.  55% high GPU revenue 385 million.  Introduced 10 new Radeon 4000 series products. 

Outlook:  3rd quarter 2008 revenue 1.58 billion dollars.  We expect Q4 numbers to be flat to that number.  We made solid progress in each of our core businesses while taking actions across the company to lower the breakeven point.  On track to reach break even point target in Q1 of 2009.  Executing strategy of tightening the focus.  We are pleased on our execution on our product side.  45nm is just beginning to take effect. 

Dirk:  This past quarter was a good on in a number of ways, but not satisfactory.  We are on the path to become the company we are going to be.  We are satisfied withs asset smart.  It is good for us, good for our customers, and for Dresden and upstate New York.  Shanghai is the best server platform in the business, and it is shipping now.

Q and A

UBS:  Congratulations.  What are the terms of the agreement?  How does that reconcile with the agreement with IBM?

AMD:  Technology revenue is associated with the sales last quarter of 200mm tools, and we also sold some process technology.  The bulk occurred in Q3.  It is not effected by IBM deal.

UBS:  Sense of share game in graphics for the quarter, and what is the outlook?

AMD:  Q4 is seasonal.   We are not looking to lose share quarter to quarter.  We are just cautious due to economics.  Tough to say on share.  Clearly we gained share.  We certainly gained share on new notebook platforms. Many products introduced late in the quarter so we feel we will have momentum for them in Q4.

Barclays: Your units were up in notebooks and servers in the 3rd quarter?  ASPs?

AMD:  Correct.  ASPs were roughly flat.

Barclays:  The graphics business will show some sequential growth? 

AMD:  Cautious at this point due to banking and financial markets.  We expect to gain share in GPU and CPU space.  It is hard to call what the numbers will land at.

Barclays:  Color from a macro standpoint?

AMD: Consumer side we saw September softer in the US, Western Europe, and some in China.  The rest of the world was typical.  Enterprise wise it has not been strong all year.  It was not distinctive as compared to Q2.

?:  Profitability went down?  Guessing mix was an issue?

AMD:  Mix is always a challenge.  In total we are feeling good about the progress we made in server, notebook, and desktop.  Last quarter we also had a tool sale so you have to back out both numbers to do apples to apple.

?:  GPU a great quarter on sales, fall through was spectacular.  Is that a sustainable metric?

AMD:  As we introduced the new products it was significantly better than our competitor so that we were able to maintain pricing throughout the quarter.  Prices will continue to be competitive, but tougher to maintain that kind of fall through on incremental sales.

?:  Gross margins and operating margins to trend next year?

AMD:  We will hold 09 till the analyst discussion for the analysts meeting in November.  For Q4 we are just starting 45nm.  We are shipping Shanghai 45nm product.  It is ramping.  We will have better products and the cost advantage at 45nm.  The market is what we are struggling with the handicap.  New products bring better ASPs, and cost control at 45nm.  Market condition is the part we do struggle with for the 4th quarter which is why we guided flat.  Opex flat to slightly down.

?  Exit strategy for the foundry business?

AMD:  ???

Wachovia:  Shanghai, when will we expect servers shipping?  Desktop?

AMD:  OEM systems in the market this quarter.  Shipping desktop this quarter, products for sale early next quarter.

Merril Lynch:  Opex down next quarter.  Opex needs to come down by 100 million.  Where will that come from?

AMD:  We continue to execute the transaction for asset smart.  A change in our GnA perspective.  R and D, sales and marketing, GNA.  We will start the year at a 1.1 billion break even point.

Merril Lynch:  Revenue associated with that?

AMD: Just cutting things we won't need on a go forward state.

Merryil Lynch:  Quad core up 50% but up only 9% in revenue.

AMD:  More features in existing price points.  Two quarters ago we were shipping dual core, now we are shipping quad core.

Goldman Sachs:  Are you comfortable with inventories at this level?

AMD:  We anticipated a strong Q4, so we backed off a bit to manage inventory for the turbulent market place.  If we need more units we are poised to respond.  We probably built more in Q3 than this environment will need.

Goldman Sachs:  Lower manufacturing Q4 cost impact?

AMD:  45nm cost impact will lower them.

Goldman:  Asset smart manufacturing in a foundry challenges?

AMD:  Going to have to modify behaviors.  We learned a lot about what we need to do by seeing how ATI operates with their foundries.  Supply chain and new product development.  Make them more formalized.  Changes will enforce more discipline.

J and P:  Puma platform graphics attachment range rate, and more higher end laptops?

AMD:  Mix selling now is a little bit lower.  Discrete graphics attach rate is lower as well.

J and P:  Penetration efforts in enterprise.  Shanghai, biz class desktops and notebooks.

AMD:  Our server business is our big enterprise business.  On the client side 08 has been the year of design wins..  Now in the mode of getting those systems sold through their channels.  We have a lot of opportunity.  Lots of growth we can still tap. With Barcelona shipped for an entire quarter, we are making progress.  We saw strength return in the 4P arena.  Customers are enthusiastic about shanghai in Q4.

J and P:  Percent of foundry company?

AMD: voting ownership 50/50 and 45/55 AMD/Dubai.

J and P:  Response to Atom from Intel?

AMD:  Complicated answer over the phone.  We will show that at the analyst conference.  Netbook is a new form factor and opportunity.  We do have strategies for lower price points and smaller form factors.

STN:  Continued improvement in gross margins?  Will that continue into Q4?

AMD:  If it was business as usual that would be easy to call.  Based on market condition it is tougher to call.  We will have the improved mix, and cost of 45nm.  That will yield better gross margin.  What we don't know is the mix we will ship. 

STN:  Asset smart:  Alleviated the debt, and stronger partnership with IBM.  Weak market you might be able to pick up some design engineers.  More people from IBM being involved on the Foundry side?

AMD:  IBM has publically expressed their support behind the foundry venture.  Strong technically and financially strong foundry to the ecosystem.  Expect partnership to get stronger.  09 high order of getting better results from who we have in house.  We always rebalance the workforce to get people working where we need thsem.

Duetchs:  How would you describe recent demand patterns?  Gotten worse, better, stayed the same?

AMD:  Doesn't seem like a disaster, but it is not as strong as normal.  We are not seeing inventories being a lot out of line.

Deutche:  Cash fell quarter over quarter?

AMD:  We collected the majority of the 191 in prior quarters.  The 191 didn't show up just in Q3.  It showed up throughout the year. 

Morgan:  45nm, assume a relatively fast ramp what are the milestones.  Crossover vs 65nm?

AMD:  Fully converted in the first half of 09.  Over 50% in Q1.  Less than 4 quarters to do full conversion.

Morgan:  Desktop units are up, ASPs are flat.  Notebook and server units are up.  Are ASPs down on them?

AMD:  MPU portfolio ASP was flat.  Desktop flat.  Notebook down barely.  Server ASP up a wee bit.  Flat across the board.

Morgan:  Pricing going forward in Q4?

AMD:  What is the mix we sell?  How rich a mix are we able to sell?   What is the competitive dynamic?  We don't expect pricing dynamic to change. 

Bank of America:  Relative growth between desktop and notebook.  Where did revenue grow faster?

AMD:  quarter to quarter notebook outpaced revenue in a better than 2X than desktop.

Bank of America:  quad at dual core prices effecting your margins?  Better margin at 45nm?  How much smaller is that die?

AMD:  Servers as an example, clearly at 65nm a quad core is more expensive than a dual core.  90nm dual core Opterons are what we are shipping.  45nm is a nice pickup.  We are not going to see an ASP drop and we are going to see cost reduction, and the product is hot.  In total either one of those stories are still the areas we want to move into since it is much higher margin than the client business.  Sell whatever you can in the server space at whatever technology. 

Bank of America:  Unit volumes and product mix contributed in non gap gross margins.  All microprocessor related?

AMD:  segment reporting page in the press release. 

FDR:  With a steep 45nm ramp how do we think about that impact on gross margins?

AMD:  All goodness.  Better product, at higher ASP with cost productions with the smaller die. This quarter vs q2 next year is wildly different. 

FDR:  Impact of asset smart?

AMD:  We will lose around 100 million a quarter in process R and D.  That will be replaced by higher wafer cost.  It will effectively be neutral.s

FDR:  100 million of licensing revenue in processor bucket?

AMD:  Yes.

Global Crown:  1.5 billion dollar break even on consolidated basis, or looking at design co in Q1.  That is staying focused as we have been. 

AMD:  Consistent on message.  That is for AMD the design company.  That Foundry Co piece of the bucket will have process and losses, but they are all cash less.  Our design is the money generating. 

Global Crown:  It will be multiple years when the ownership is off your consolidation basis. 

AMD:  It is more confusing than that, but it will take a while before we stop consolidating. 

Global Crown:  How does rich uncle change your SOI and bulk CMOS in your manufacturing situation.  Will you use that to reduce cost in graphics company. 

AMD:  Fab 38 bulk process and we will move some GPU product to the foundry company.  Having two really good suppliers on the GPU side can improve costs.  We finally get scale.  It can ramp on the total industry. 

Global Crown:  On SOI and one bulk CMOS fab? 

AMD:  A bit simplistic, but close to that.

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