Earnings Call: Q4 2010

Jan 20, 2011

Good afternoon. My name is Huey, and I'll be your conference operator for today. At this time, I would like to welcome everyone to AMD's 4th Quarter 2010 Earnings Conference Call. All lines have been placed on a listen only mode at this time. After the speakers' remarks, you will be invited to participate in a question and answer session. As a reminder, this conference is being recorded today. I would now like to turn the conference over to Ms. Ruth Cotter, Vice President of Investor Relations for AMD. Please go ahead. Thank you, and welcome to AMD's 4th quarter and year end earnings conference call. Starting this quarter, we are providing written CFO commentary, call today, which will contain additional information regarding AMD's results and outlook and can be found in the IR section of AMD's website atquarterlyearnings.amd.com. Participants on today's conference call are Thomas Seifert, our Chief Financial Officer and Interim CEO and Rick Bergman, Senior Vice President and General Manager, AMD's Product Group. This is a live call and will be replayed via webcast on amd.com. There will also be a telephone replay. The access code for both is 150,279. The telephone replay conference call today will be available for the next 10 days starting later this evening. I would like to highlight a few dates for you this afternoon. Thomas will present at the Goldman Sachs Technology and Internet Conference on the 16th February in San Francisco, and our Q1 quiet time will begin at the close of business on Friday, March 18. On December 27, AMD announced that starting with the 1st fiscal quarter of 2011, the company will begin accounting for its investment in GLOBALFOUNDRIES under the cost method of accounting and will no longer recognize any share of GLOBALFOUNDRIES net income or loss in its statements of operations. The transition to cost based accounting was triggered by the contribution of Chartered Semiconductor to Global Foundries and amendments to certain agreements. As a result of the contribution, AMD's ownership of the newly combined entity on a fully diluted basis is approximately 14%. Conference call. Reconciliation for all non GAAP financial measures discussed on today's call is included in our financial tables that accompany our earnings release conference call available in the Investor Relations section of amd.com. Before we begin today's call, I'd like to caution everyone that we will be making forward looking statements about management's expectations. Investors are cautioned that those statements are based on current beliefs, assumptions and expectations speak only as of the current date and involve risks and uncertainties that could cause actual results to differ materially from our current expectations. The semiconductor industry is generally volatile and market conditions are particularly difficult to forecast, especially in light of the current state of the economy. Call. We encourage you to review our filings with the SEC, where we discuss the risk factors that could cause actual results to differ materially from our expectations. You'll find detailed discussions about such risk factors in our most recent SEC filings, AMD's quarterly report on Form 10 Q for the quarter ended December 25, 2010. Now with that, I'd like to hand the call over to Thomas. Thank you, Ruth. Before we begin, I would like to take a moment to and to thank Dirk Meyer for his leadership as AMD's CEO over the past two and a half years. Indeed, he leaves behind a much stronger company that the one he inherited, a much nimbler AMD with the people, the IP and the spirit to fully realize the breadth of opportunities in front of us. As you know, AMD announced last week that our Board has formed a CEO search committee led by Bruce Claflin, Executive Chairman of AMD's Board of Directors. The Board has retained an executive search firm to assist with this process. Person with the right vision, experience and track record to lead AMD into the future and to create increased shareholder value over time. While we don't plan on communicating further until the search process is concluded, we will update you should events warrant. That being said, we are here to focus on our 4th quarter and full year earnings results. 2020 was an important year for AMD. It was a year in which we achieved many of our major milestones, results, resulting in a company with solid momentum and well positioned for the opportunities immediately ahead. Q4. First, we demonstrated that our fabless business model works, restructuring our balance sheet and reducing quarter. Our overall debt by $400,000,000 excluding GlobalFoundries, improving our 20 10 non GAAP gross margin by 9 percentage Q4 earnings conference call over the prior year and generating $553,000,000 in non GAAP operating income and $355,000,000 in adjusted free cash flow in 2010. 2nd, we showed that our execution engine is on track, delivering Bulldozer, our impressive new X86 core designed to bring a new level of performance and performance per watt capability across the full spectrum of clients and service. Taking a clear leadership position in discrete graphics, having shipped over 35,000,000 DX11 enabled GPUs to date and introducing the first of our AMD Fusion family, Which for the first time combines our expertise in x86 computing and graphics into a single new architecture, arguably the most significant advancement in processor architecture in decades. And third, we proved that we have indeed changed the game. We made graphics matter, irreversibly shifting the focus of the industry to a more balanced combination of CPUs and increasingly robust graphics capability. And we introduced a new category, the accelerated processing unit or APU, changing the trajectory of processor design and development from here forward. Focusing more specifically on the 4th quarter, Industry momentum for Fusion is strong and growing. OEM adoption of Brazos is excellent. We shipped more than 1,000,000 cloud browser platforms in its debut quarter to world class OEMs including Acer, browser's technical performance is superb, offering a unique combination of full 1080p HD video and all day battery life. At CES, browser based notebooks received several significant innovation awards, including Laptop Magazine's Editor's Choice Award. Our AMD Fusion software ecosystem is maturing rapidly with key partners such as Adobe, ArcSoft, Corel, CyberLink, DIVEX and Microsoft announcing applications optimized for AMD Fusion APUs. And finally, customers are discovering that Brazos is ideal for more than notebook platforms, earning design wins in everything from tablets to Internet ready set top boxes, thin clients and point of sale kiosks. On the technology side, we have entered a new phase with our 32 nanometer ramp and are now sampling thousands of Lano products to a wide 22 nanometer bulldozer based Orochi parts in volume with customers worldwide. We expect Orochi for desktops to ship in production Q4 revenue in early summer and the ROCE for service in late summer. Turning to the 4th quarter financial summary. 4th quarter revenue was $1,650,000,000 up 2% compared to the Q3 of 2010. We reported non GAAP net income of $106,000,000 and a non GAAP diluted EPS of $0.14 4th quarter non GAAP operating income was $141,000,000 4th quarter gross margin was 45%, down 1 percentage point from the prior quarter at the high end, however, of our target model for the year of 40% to 45%. Operating expenses continue to hit within our target model. R and D was 352,000,000 and SG and A was $250,000,000 for the quarter. Total operating expenses came in at $602,000,000 slightly less than the guided $610,000,000 4th quarter adjusted EBITDA was $241,000,000 down $4,000,000 sequentially and non GAAP adjusted free cash flow was $11,000,000 down $80,000,000 from the prior quarter. Now switching to the business segments. In our Computing Solutions segment, 4th quarter revenue was $1,220,000,000 flat sequentially, and operating income was $91,000,000 In the Graphics segment, revenue for the quarter was $424,000,000 sequential growth of 9% was mainly due to 1st double digit growth unit sales to the AIB channel Due to the success of our 2nd generation DX11 enabled GPUs, the AMD Radeon HD 6,800 and 6,009 Q4, as well as seasonally higher game console revenue. Operating income for the Graphics segment for $68,000,000 Turning our attention to the outlook. The following statements call. Concerning AMD are forward looking and actual results could differ materially from current expectations. For the Q1 of 2011, AMD expects revenue to be flat to slightly down sequentially. We expect operating expenses to be approximately $650,000,000 due to an extra week in the Q1 and a separation payment of about $12,000,000 to DIRKMAIER. Tax is expected to be approximately $4,000,000 In my first days in my new role, I have never been more confident in this company and our capacities to succeed. We have world class people With a propensity for solving the world's most difficult technical challenges and a passion to see the next cycle of innovation come to fruition, I really want to thank them for their commitment and achievements over the past year. We have unparalleled assets, starting with the strongest combination of X86 and graphics technology in the world. A business model now and we are much more attuned to embrace industry shifts in the loyal and expanding group of customers and partners all looking for AMD to succeed. And we have solid gross margin expansion opportunities. We are just beginning to launch some of the most exciting products into the sweet and we have lots of headroom in which to grow. My priorities and those of the company are clear. We must stay the course of execution and delivering what we promised. We will, however, increase the pace of converting our significant potential into shareholder value, and we will embrace the changes in the market Q4, where our prospects for success look good. In summary, we will continue to both execute our leadership strategy and generate increasing momentum for our customers, our shareholders and ourselves. And at this point, I would like to turn it back to Ruth. Huey, we're very happy to poll the participants for the question and answer session now please. Yes, ma'am. Our first questioner in queue is Ramin Shah with Nomura Securities. Please go ahead. Yes. Hi. I wanted to follow-up on the guidance. You're guiding revenues flat to down for Q1, but you've got an Shouik, how much do you think that benefits you this quarter? And then I have a follow-up. Yes, good question. We guided flat to slightly So certainly better than seasonal. If I had to paint a box around it, it's probably around 0 to minus 4%. So it's certainly a sub seasonal quarter that we I'm sorry, I'm not following. So you're guiding flat to down 4%. Are you does Chad, are you getting any sort of benefit from the extra week in revenue? Well, it's a mixture of course of an extra week of revenue, But we are also seeing better than seasonal demand. Okay. I got it. And then could you just give us an update on the timing of Lano? I didn't see that mentioned in your CFO commentary. Their shipment dates for Lano have not changed. We are sampling, as I said, in high volume now and getting our customers ready to ship products in the 2nd quarter. All right. Terrific. Thank you. Thank you, sir. Our next questioner in queue is Tim Luke with Barclays Capital. Please go ahead. Thanks so much. Thomas, as you look forward, given the change in the leadership, What do you think some of the new points of emphasis are likely to be as you move forward to the extent that You may be able to just recap what you think some of the differences in terms of emphasis maybe going forward. Well, for the near term, I think there you shouldn't expect too much of a difference. I think we entered this year with tremendous momentum coming out of CES and seeing the excitement for their 1st fusion products, bringing really compute and graphics performance to a form factor that had not seen that before and our customers are excited by that and they're excited by the battery life that goes along with it. We have a terrific roadmap this year ahead of us. I mentioned that we are looking forward to ship Lano products and the ROACE products in the sector. And this really focuses the organization pretty much. There will be Opportunities that are incremental to that that we will have to look at. But for the near term, it's really making sure That the focus stays on execution, that we accelerate the pace with which we look at some of the opportunities, especially when it comes to margin expansion. And then also consider that the changes that we have been talking about over the last year that we have enabled in this new AMD business model Really work to our strength. We are now an IP generating company. We'll focus The company where the strength always was, designing and innovating great products and bringing them to the markets in in an efficient manner. That will be the near term priority. And then we will be able to based on that think incrementally on where Other opportunities are that make us successful. If I may Thomas, you in guiding to the 650 of of OpEx, even with the payment to DIRG and the extra week, it looks like a fairly significant increase. Can you frame for us how we should think about the OpEx going forward for the year in terms of the shape of the OpEx. Is it going to be how would it trend sequentially as well? I'm trying to get And separately, given that you are guiding for a fairly flattish revenue outlook, should we assume A fairly flattish gross margin or other puts and takes for the beginning for the Q1? Thanks. Very good question. So, you should look at operating expense guidance for the Q1 really in a flattish way. If you take out the additional week and correct for the With around €610,000,000 its OpEx development in the Q1 is rather flattish. I think we have shown in the call. We manage the company in a very disciplined way when it comes to operating expenses, and we have no intent to change that. The gross margin question is a good question. We see in the current quarter some ups and downs, of course. We will see gross margin opportunity just because of product mix and fusion launches. However, we also will see some headwinds because of their significant ramp of 32 nanometer capacity. The ups and downs probably equal So I would assume a rather flattish gross margin development in the Q1. Thanks so much, guys. Thank you. Our next questioner in queue is now Rishi Srivastava with Bank of Montreal. Please go ahead. Hi, thank you. Just two questions. Number 1, what is the assumption for PC growth for 2011? Your small rival from across town is expecting low to mid teens, if I remember correctly. And the second question is on the GPU side. Last quarter, you guys had talked about meaningful share This time around, is it just market growth or it shouldn't appear that Share losses should abate in 1 quarter, so just some more perspective on that, please. Thanks. Yes. So good question. So I think with respect to BC growth, An expectation that the market is growing between 10% 11% is probably launch in the graphics segment. We launched 2 high end products that certainly caused excitement and revenue growth, and that were driving the performance of the company. If I Rick, you could go into more detail here. Yes. I don't recall us talking about share losses in the GPU market. We said we're one of the leaders in the DX11 category and we just launched entirely new second generation both on the desktop and notebook side. We have obviously or had 62% share in the 3rd quarter. That gets tough in that particular market to maintain that level. But certainly, we had robust design wins on all of the new platforms in 2011. So, we expect our GPU continue to be successful going forward. Okay. Thank you. Thank you. Our next questioner in queue is Jim Covello with Goldman Sachs. Please go ahead. Great. Thank you so much for taking my question. I appreciate it. I guess maybe a couple of big picture questions. First, recognizing that AMD doesn't have its own manufacturing facilities anymore. What do you think the real impact of Intel's very significant CapEx budget is going to be on the industry and the competitive dynamic? Very good question. So I think they announced slightly above $8,000,000,000 for this year. If you look at the ecosystem that supports us, GlobalFoundry just announced an investment of more than $5,000,000,000 this year. Now a second large provider of manufacturing capacity, TSMC gave guidance of around $6,000,000,000 So in terms of manufacturing infrastructure and scale, We are supported by a pretty substantial ecosystem ourselves and that makes us confident moving forward. And then I think we discussed those issues at length. We are moving into an environment Where people do not buy processor frequency anymore, but look at what capability experience we can deliver in this form factor and we are really looking forward to the LENO launch in summer to put things into perspective. That's very helpful. And if I could ask as my follow-up, maybe relative to your guidance for the Q1 or just more Generally, what kind of tablet cannibalization assumptions, if any, are you incorporating into that guidance as we have a little More visibility on the number of tablets that are shipping in any given quarter. Do you think that's meaningfully impacting the DC space at this point or is most of that tablet growth incremental in your view? Thank you. Yes. Obviously, there's a lot of opinions around topic, especially in light of some of the announcements made this week. As we talk with our OEM partners, We don't see a deterioration in the market in a major way in a notebook area. And any cannibalization is built into our estimates that Tom has just provided. Thank you very much. Thank you. Our next questioner in queue is Chris Danely with JPMorgan. Please go ahead. Hey, thanks guys. My first question, so we're seeing a lot of the APU enabled notebooks coming out. Can Can you just maybe give us a sense of the price point? Is this more of a net book type of product, a mainstream book, a high end notebook, just a little more color there. Absolutely. So, yes, if you looked at the various announcements, it's all the above and then some also desktop and all in one form factors as well as today we had an embedded Brazos announcement as well. So everybody gets the value of what Fusion brings to virtually every single computing platform out there in the industry. And then and certainly as we bring Lano into play later this year, you'll see us move into even richer and higher price performance notebook and desktop platforms as well. Great. And as my follow-up, you guys sound pretty fired up. It sounds like business This is pretty good turning a tidy profit. I guess, so why is Dirk not there? Is it you guys thought you should to capitalize on tablets more. Do you feel like your gross margin should be at 50% and growing a lot faster? Can you just maybe shed a little light and why he's no longer there, what he was missing. I'm not going to go into detail, too much detail here. We discussed this last But this was not a looking backward based decision. I think the shape we are in today, the momentum we have generated, We feel good about it. It was very much a forward looking statement from the Board. And I'm not going to provide any more color on that What we said last week. Okay. Thank you. Our next questioner in queue is Sean Webster with Macquarie. Please go ahead. Yes. Thank you. So you mentioned a couple of different things in commentary as well as your press release. I was wondering if you could share with us what your processor units did sequentially as well as your graphics chip units? On the graphics side, they were up sequentially. On the CPU side, they were Okay. Thank you. And for the pricing environment, do you have expectations as we go in to the next quarter or 2 based on assumptions on mix or what's happening within the notebook and desktop and server segments. Yes. So we always said that we expect the pricing environment to be rather flattish. We will see some Okay. And then, are you experiencing, given the success and some of the design wins recently or how is the supply situation? Are you expert Seeing any tightness, what's our lead times right now? From a supply side, we are really in good shape. So all the shortages we During the first half of twenty ten has disappeared. We don't see any shortages at this point in time. Okay. And then maybe a couple of quick accounting related ones. So with GlobalFoundries coming off, the whole equity impact line item goes away and then something arises on the balance sheet. Is that how the mechanics will work as we go into Q1? Yes. So, as part of the accounting change. We are just in the process of a valuation analysis that will be completed during the course of this quarter. This will have an impact on our equity stake, the value of our equity stake in GlobalFoundry and this will be it. Of course, we will look at this equity from a fair value perspective on a yearly basis and do testing. But beyond that, you will not see any further impact from future GLOBALFOUNDRI losses or profits on our balance sheet on our balance sheet or on our P and L. And how does the change in share ownership affect your diluted share count? It's at 14%. The value of the 14% might change, but the 14% For the quarter, I was at 14%. Okay. And then what was the legal settlement, good news you saw and that will be my last question. We settled with Samsung. Okay. Thank you very much. I would like to interject just a slight correction Thank you, sir. Next questioner in queue is Glenn Young with Citi. Please go ahead. Thank you very much. I looked at that laptop magazine review that you referenced earlier, Thomas. Sounds pretty good. I guess the question is, are the Initial 1,000,000 shipments of Fusion predominantly aimed at net book, 1. And then 2, it seems you had no market share there before. Do you feel Like you are already gaining share of Fusion at this point? Yes, very good question. So the shipments were not And of course, we are excited by bringing such a kind of performance into a segment of the market where we had no revenue before. So any shipment in there, it's going to be market share accretive. With the response we have seen, we are quite bullish with our expectations for this year and the traction we have seen so far. And just also a quick clarification, the net book and small notebook category continues to get more and more blurred. And really that's what we were targeting the ultra thin and light type of form factors with our Ontario solution. And in fact, the HPDM-one you referenced technically is a small form factor notebook because it's about 6 inches Interesting. Okay. And then maybe thinking about the same question in a different way. As you sort of think about the shape of the year, is there a time when the share gains become more evident, because Not necessarily so in Q1, right? Your guidance in Intel is largely the same. So as we think about beyond that, is there a quarter in which you think or or timeframe which you think Fisher gains really start to show up in the numbers? We will have just based on the shipments and the launch date, Obviously, a bias towards the second half of the year. Okay. And can I just ask one other quick question, which is you're going to change at the end of this quarter your wafer pricing agreement with GlobalFoundries? Can you talk about how we should think about the impact of that on gross margins as an independent and when that happens after this quarter. Yes, good question. So we always said that moving forward, our relationship becomes foundry like. The impact that this will have are, of course, were part of the guidance we gave at our Analyst today in November of last year. So we moving forward, we will have some positive support on margin development out of leverages, including higher productivity, of course, of the 32 nanometer node, A lesser degree of idle capacity in GlobalFoundry and Tristan and so on. Thomas, just to remind us what that guidance was you gave last November, gross margin guidance? We guided a range of 44% to 48% for the year, up From 40% to 45% for 2010. Okay. Thank you. Thank you. Our next questioner in queue is John Pitzer with Credit Suisse. Please go ahead. Yes, guys. Congratulations. Thanks for letting me ask the question. I guess, Thomas, my question. On flat computing revenue, operating income in that division was down about $73,000,000 sequentially. Hoping you can help me Stan, why the big drop in operating income? Is this a 1 quarter phenomenon? Is it more the desktop notebook market? Or is this a server phenomenon? Just Yes, good question. So, it was a mix of things. We saw some price initiation in the quarter because it was a very consumer driven quarter in terms of demand. We also managed, I hope you saw that, our inventory in a very good way. But that also means that we had some higher degree of underutilization in the factory in placement. We have still an obligation to pick that up. So those two effects pretty much explained the impact on operating income. And then I guess conversely when you look at the graphics business, it was a really nice jump in operating If I'm correct, 4th quarter is usually seasonally strong on the gaming side. How do we think about operating profits in that business as you move into the first half of 2011. Well, we have ambitious targets when it comes to profitability and they are also true For the graphic segment, we have put some heightened emphasis on profitability. So we are hopeful to keep the performance at that level. And then, Thomas, one quick last one. Did you give gross margin guidance for the Q1? And if not, is there a range We should be thinking about. Yes. Just on one question earlier, I talked about flattish gross margin development for the company in Q1. Perfect. Thank you. Appreciate it. Thank you. Our next questioner in queue is Uche Ojei with UBS. Please go ahead. Thank you very much. Thomas, let me just start off by asking you about service. I mean, one of the areas where We've seen AMD, especially even the results just reported, you had weak server ASPs. And what I found that if I look at Intel's numbers, service was probably one of the strongest that they had. So question here is, what are you doing to kind of start to regain traction, especially as you now start to launch new process architectures. Is there anything you're doing from an execution standpoint to make sure that you're able to get more traction within this market. So that's the first question. And also if you can talk about what you see as underlying growth expectations for Saba through 2011. That would be helpful. Yes. I'm not going to make a secret out of it that we were disappointed with our performance in the segment in the Q4. This is one of the areas where we see significant Room for improvement and that is one of the areas I would like to refer to when we talk about picking up the pace. We think we have a good product portfolio in place, but we have to work on our go to market strategies and this will be one of the emphasis moving forward. Okay. Just one question on the GPU side, I mean the strength of Cineg GPU, I apologize if you've answered this earlier, but On the strength of Cine GPU, what is your sense of attach rates in the Thunder Bridge platform? Because one of the big questions obviously how attach rate for graphics will fare as we see more APU type products through 2011. So we've seen some strong numbers this quarter, which probably suggests results. Any commentary as to how you see the rest of the year playing out would be helpful. Rick, do you want to answer? Certainly. So we're thrilled about the increased attention towards the GPU and video capabilities of PCs. At the end of the day, AMD wins, whether it's a Fusion Processor or a Discrete GPU. Now saying that, what we've seen on attach rates They're basically the same as they've been in 2010. So no fundamental difference on the new processor platforms that have been Announced or will be announced in 2011. Okay. And then lastly for you, Thomas, pulling on from Glenn's questions on the changing wafer pricing model. As you ramp this new as you start ramping up to 32 nanometers, what is the focus. Is it market share gain or gross margin optimization? Can you do both? And does this new pricing model allow you to do both? Profitability first, I made no secret about this over the last 5 to 6 quarters, gross margin expansion potential is the big lever for us. However, in that case, in that instance, both things come together because the strong expansion of our Llanow ramp will allow us to grow into market segment and product SKUs that allow us to command a higher price performance. So I think this is one of the two levers where both things come together, where we can combined market share gain and gross margin expansion at the same time. Okay. Thank you very much. Thank you. Our next questioner in queue is Sarene Pajjuri with CLSA Securities. Please go ahead. Thank you. Thomas, just wanted to get some clarity on the ASP declines last quarter in processors. I'm just wondering what caused the decline and wondering if there was if you thought if there was some excess capacity in the channel? No, that's not how I would portray it. It was really a more a product mix topic than A demand pressure or oversupply or under demand picture. And going forward, I mean, you said you expect the PC market to grow 10% to 10% plus or minus, wondering what your expectation for pricing for 2011 is? No doubt it's going to be a competitive environment, but we always said that we We think that we can compensate price erosion with an improvement in price performance on our side Just growing and diversifying into product SKUs that we have not touched or have not served yet. Okay. And then one longer term question. There was some media speculation about why Dirk left. Some newspapers were talking about tablet strategy as the main issue. I'm just wondering hypothetically, if you were to enter the tablet market, do you think you can sustain and the long term model that you gave us or do you think these investments will have to go up? Thank you. Well, I'm not going to comment on any speculations that are out there. I think what we can say, however, is just looking at product roadmap and what we have been delivering with Brazos shows us that if we applications that are outside of market segments that we currently serve and we will entertain that. So to me, tablets present a wonderful opportunity for AMD. I've been in the PC industry 20 plus years. We've really struggled to get into The living room and it's clear that tablets are finding their way into the living room a real consumer experience. And as consumers start to utilize these tablets, They start to demand a better end user experience, which invariably means processing power, incredible graphics, incredible video, and they'll move up in size, higher resolutions and so on. And already we're seeing a number of design win opportunities for us with Brazos today. And certainly as we develop new products in that category, we will account for those new trends in the new market opportunities. Thank you. Thank you. Our next questioner in queue is Doug Friedman with Gleacher. Please go ahead. Great. Thanks for taking my question guys. Thomas, if I could start off, the marketing accounting. I believe about 2 quarters ago, you changed the way in which you're accounting for the marketing spend. Can you Highlight us on how we should think about that impacting the forward accounting on the SG and A line. Yes, very good question. So we said we had a hike. It's not going the reduction is not going to be a black and event. So we will see some reduction in the Q1 and then we have and then more relief moving forward. So on a like for like basis, we should think that we could get back to a September 10 number or In terms of expense to revenue, that is certainly the target. Okay. And then Rick for you, if we can look at the GPU market a little bit closer detail, where do you think we are? You definitely saw a nice uptick in ASPs with the new launch of the high end products. How far along in that? Where do you think ASPs go over the next couple of quarters. And then could you offer us some commentary on what you're seeing for ASP key trends in the notebook side of the business. To address kind of both of those questions, we obviously introduced our high end products towards the end of 2010, specifically the 6,900 series and we have a couple more introductions planned shortly in that category. That 10 to push our ASPs northwards. As our new notebook products are introduced and shipments grow obviously that's the other direction, but no different trends between 20112010 on an annual basis there. And the second half of the question was remind me again. Notebook GPU trends if you're seeing any sort of price pressure in that market as your other competitor out there has been trying to take back some share and been pretty vocal about 3rd design win success. This has been a I've been in the GPU business for a long I mean, there is always a tough competitive market and we'll make sure that we're successful there as Thomas pointed out and we'll continue to profitably grow that business. I don't think anybody is better positioned than we are in the GPU market. We obviously have our Fusion Processors. The discrete GPUs actually complement our Fusion Processors nicely, whether it's on our own platform or these customers that By the other guys platforms for whatever reason, once that same graphics performance, they invariably will look towards AMD GPU solutions. Great. And if I could sneak one more in for you, Thomas. If I look at the list of customers that you commented or have adopted and launched Brazos platform products. Is there a possibility that customer list continues to expand? What are your thoughts on customer acquisition plans? Very aggressive. And of course, the momentum that we have generated with the launch is something that we continue to move forward. It's exciting performance with outstanding battery life at that form factor and We will use this momentum to grow customer base and market share. Terrific. Thank you. Thank you, sir. Our next questioner in queue is Patrick Wong with Wedbush Securities. Please go ahead. Great. Thanks for squeezing me in. So, hey guys, can you guys maybe characterize how you see your Fusion ramp? I guess if I look at this, you guys shipped 1,300,000 platform since just last 2 months last quarter. How should we think about that ramp through the next couple of months? And then I guess separately maybe for Rick, can you talk about your expectations of how Lando is going to competitively stack up against Intel's mainstream Sandy Bridge product lineup. I guess maybe what drives those anticipated share gains? Let me take the first part and then let Rick answer the second part. We're not going to provide any market share projections at this point in time. However, I think you can read and hear the excitement we feel for that product and the momentum we have generated. So we feel confident to gain significant market share in this segment with this platform and this ultimately will be reflected in the shipment numbers and in the ramp numbers. With regards to the competitive platform, we are pleasantly surprised at CES. Prior to CES, there were claims of discrete level graphics performance and that type of capability. Obviously, as the details were enrolled and real benchmarks were run on real applications, I felt well short of what we would offer in discrete graphics capabilities. As we look forward with Lano, we're really excited because our value composition will really shine through. We'll show the world what GPU performance and capabilities mean with Lano and it will be Much higher performance than what you're seeing out there from our competition in that area. Okay. So it's still more of a it's more of highlighting your graphics advantage there in terms of performance. Well, absolutely, we've said all along and Thomas, as you heard earlier in conference call that the market is telling us and even our competitor was stating how important graphics and video is now for consumers because that's Really where all of us consumers care about is that video or graphics display. So we're not wavering from that message that that is when you buy IMD Notebook or desktop. That should be top priority on your list, your experience. Got you. Okay. And then just a longer term strategic question. I'm curious if there's been a change to the in our business in the past and sold it. Just curious how you guys are thinking about that today? First of all, we have you have to realize that there is the expertise and the IP that we have in the company on X86 and GPU processes is There are only few companies out there in the world that have processor design capabilities at our level. And those capabilities can also work on other platforms. However, I think it's important to keep in mind where to our core opportunities are for the moment. We will embrace any changes that are happening in our ecosystem. And And I think with the changes the company has gone through, transforming us in the business model we have now, I think we are really set up to cope and embrace The opportunities and possibilities that this could mean. Okay. Thanks so much. Good luck. Thank you. Operator, we're happy to take questions from 2 more participants, please. Okay. Our next questioner in queue is David Wong with Wells Fargo. Please go ahead. Thank you very much. Could you give us an idea of your sequential growth in server related revenues? So for the current year, you mean? For the December quarter and what you expect in the March quarter? So for the December quarter, we will be slightly down. For this quarter, we have higher ambitions. Great. And when you ramp your 32 nanometer gross margin and 45 nanometer products that will supersede. That depends upon which when you look at it. In the early beginning of the ramp, you have Our goal and the opportunity this technology offers. At the end, this will be highly gross margin accretive. To be clear, the question was stated ramping in the second half of the year. I mean, we have begun that production ramp now. And obviously, it picks up through the course of the year, but But does your gross margin guidance for the year assumes that as you ship 32 NAND in pre to product in the second that could have a somewhat lower gross margin at least initially. Is that correct? Well, we gave guidance for this year for in the range of 44% to 48%. And this guidance includes that with the ramp up in neurotechnology, you have certain ramp up costs. Thank you. Our final question in queue for today comes from Stacy Rasgon with Sanford Bernstein. Please go ahead. Hi, guys. Thanks for squeezing me in. Two questions for you. The first one, Now that you're shipping Brazos and a little more volume, can you give us a little more color on the ASP margin profile of those products? Can you give us some maybe I'll just stop it there for this one? Well, you know that we never provide gross margin profiles on a product basis. I mean, just can Can you give us some feeling just sort of relative to corporate average? Is it above? Is it below? Is it in line? So we always said that the launch of the Fusion product, Both on the APROZOS as well as on the LANO level are going to be margin accretive to the overall model. So I think it's fair to assume The product is going to be above the corporate average. Got it. That's great. And for one more question. I know you don't want to give any more color behind DIRKS dismissal, But in terms of the reasoning behind it, which has been reported to be around the long term strategic vision around tablets and the mobile connected devices. Why is developing a focus on that space today as important for you as when arguably I could make The argument that you can continue to seek out the incremental growth opportunities in your core market, your products from a power sample right now probably aren't ready for the tablet space. There are a lot of other competitors there. The margins might not be as attractive and overall the opportunity is probably smaller. And frankly, I'm glad to hear that your Atlanta was looks like it's on the way, but you're not done executing on what's in front of you right now. Why is right now The time to shift the focus to more of these long term strategies rather than really trying to redouble the focus on the X86 opportunity, which is in front of you today. So, a very good question. Let me start with the second part first and only slightly comment on your first part. There is no deviation from the near term priorities within the company. Focus on execution and delivering promises and the guidance we gave is the top priority for the company and it's my top priority. So let there be no doubt. The question on the future outlook is shortened in what was Reported. I think the discussion was more than just a tablet strategy. The mobility discussion is well a client is also as well an infrastructure question. And it was also a structure question. And it was also a topic that you heard from the press that we talked about picking up the pace for the company and addressing some of the near term opportunities that we have to improve our profitability in a more aggressive manner. So to reduce it to a just tablet statement would be wrong And was certainly not the case and it's certainly not an indication that we are going to let the focus shift away from what the priorities are in terms of delivering what we promised. Got it. Thank you, guys. Thank you. We'd like to thank everybody for in today's call, and we look forward to seeing you at the Goldman Sachs Conference in February. Thank you. Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. Attendees, you may now disconnect.