AGM 2017

Apr 26, 2017

Good morning, ladies and gentlemen. My name is John Caldwell. I am Chairman of AMD's Board of Directors and I will chair today's stockholders' meeting. I now call the meeting to order and welcome you to AMD's 2017 Annual Meeting of Stockholders. I'd also like to welcome stockholders attending the virtual meeting, which is streaming via the Internet online now. We want to make our meeting as accessible as possible to stockholders, and so we are pleased to provide all of you the opportunity to vote and ask questions either here in person or via the Internet. I would now like to introduce to you my fellow Board members and Board nominees who are here with us today. Doctor. Lisa Su, Director and our President and Chief Executive Officer Ms. Nora Denzel, Director and Chair of our Compensation and Leadership Resources Committee Mr. Joe Householder, Director and Chair of our Audit and Finance Committee Mr. Mike Inglis, Director Mr. John Marin, Director Mr. Ahmed Yahia, Director. Before continuing, I'd like to recognize Mr. Bruce Clapton. Bruce? Bruce has served on our Board since 2003 and has chosen not to stand for reelection this year. Bruce, on behalf of our Board and the entire company, I'd like to thank you for your contribution, your years of service and your dedication as a Board member and as importantly, perhaps more importantly, as a Chairman of our Board for many, many years. I'd also like to acknowledge of Marty Edelman, who served as a Director for 4 years on our Board and who stepped down from our Board earlier this year. Let me now introduce our Senior Vice President, Chief Financial Officer and Treasurer, Mr. Devinder Kumar our Senior Vice President and General Counsel, Mr. Harry Wallen and our Corporate Vice President and Corporate Secretary, Ms. Beth Osman. This morning, we will first take care of the formal business of the meeting, then Doctor. Su will provide her report. We'll also set aside time at the end of the session for questions you may have of our directors, our officers. We also have representatives of Ernst and Young present who are also available to ask to answer questions. I now call this meeting to order. As Chairman, I designate Ms. Beth Osman as Secretary of the meeting. Ms. Osman will now conduct the formal portion of the meeting. Good morning. As set forth in the notice of the meeting, the official business to be conducted is as follows: 1st, to elect the 8 Director nominees named in our proxy statement 2nd, to ratify the appointment of our independent registered public accounting firm for the current fiscal year 3rd, to approve the amendment and restatement of the Advanced Micro Devices Inc. 2,004 Equity Incentive Plan 4th, to approve the proposed Advanced Micro Devices Inc. 2017 employee stock purchase plan 5th, to approve on a non binding advisory basis the compensation of our named executive officers 6th, to approve on a non binding advisory basis the frequency of future votes on the compensation of our named executive officers and finally, to transact any other business that may properly come before this meeting. Following the formal business of the meeting, the meeting will be concluded and Doctor. Su will deliver her report as President and Chief Executive Officer of the company. A stockholder question and answer session will follow her report. I would like to point out that management may be making forward looking statements about the company's current plans and expectations. Actual results may differ materially from current plans and expectations, so I encourage you to review our SEC filings, where we discuss the risks inherent to our business. You will find particularly detailed discussions in our annual report on Form 10 ks for the fiscal period ending December 31, 2016. And finally, please hold your questions until after Doctor. Sue's report is concluded. Now returning to the business of the meeting, I have been authorized by the Board of Directors to appoint Ms. Chris Vico as Inspector of Elections for this meeting. Ms. Vico will determine the number of shares represented at this meeting, the validity of proxies, the existence of a quorum and the number of votes on all matters voted upon at this meeting. The Board of Directors fixed the close of business on February 27, 2017, as the record date for the determination of stockholders entitled to notice at this meeting and entitled to vote at this meeting. I have a list of stockholders of the company from Computershare, our transfer agent, showing approximately 941,398,733 shares outstanding on the record date and entitled to vote at this meeting. This list has been kept at our headquarters in Sunnyvale, California for the last 10 days and is available here at the meeting for inspection by any stockholder. I also have an affidavit certifying that proxy materials for this meeting were mailed first mailed on March 17, 2017, to all stockholders of record on February 27, 2017. The affidavit is available for inspection at the registration desk by any stockholder who may wish to see it after the meeting. The count immediately before the commencement of this meeting of shares present in person or by proxy indicated that 767,166,447 shares of the company's voting stock were present, representing 81.49 percent of the outstanding shares of common stock as of February 27, 2017. Based on this number, a quorum is present. It is now 9:0:5 a. M, and I now declare the polls open. I expect the polls to close in approximately 10 minutes. Voting today will be online or by ballot or proxy if in person. Is there anyone present who has their proxy or who wishes to change his or her vote or who otherwise desires to vote in person at this meeting. If you need a ballot, please see Ms. Vico at the back of the room or give her your ballot. She's coming forward now. Any online participants who wish to vote at this meeting should also do so now by clicking the Vote Here button. The shares of any stockholder who has filed a proxy will be voted by the proxy holders in the manner specified on the proxy form. A copy of the minutes of the annual meeting of stockholders of Advanced Micro Devices held on May 12, 2016, is at the registration desk for inspection by any stockholder who wishes to do so. We will dispense with the reading of those minutes this morning. The election of directors is the first item on the agenda. The slate of directors recommended by the Board of Directors is described in the 2017 proxy statement. The 8 individuals who have been nominated for election are Mr. John E. Caldwell Ms. Nora M. Denzel Mr. Nicholas M. D'Onofrio Mr. Joseph A. Householder Mr. Michael J. Ingalls Mr. John W. Marin Doctor. Lisa T. Hsu Mr. Ahmed Yahia. The Board of Directors unanimously recommends that you vote for the election of each of these directors. I now declare the nominations closed. The second item is the ratification of the appointment of Ernst and Young as the independent registered public accounting firm for the company for the current year. The Board of Directors unanimously recommends 4 ratification. The 3rd item is to approve the amendment and restatement of the Advanced Micro Devices Inc. 2,004 Equity Incentive Plan to amend the existing plan to 1, increase the number of shares authorized for issuance under the 2,000 and 4 plan by 27,000,000 shares and 2, to prohibit the payment of dividends on unvested awards. The Board of Directors unanimously recommends that you vote for this amendment and restatement. The 4th item is to approve the amendment and restatement of the Advanced Micro Devices Inc. 2017 employee stock purchase plan. The Board of Directors unanimously recommends that you vote for this amendment and restatement. The 5th item is to approve on a non binding advisory basis the compensation of our named executive officers as disclosed in the 2017 proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission. The Board of Directors unanimously recommends that you vote for this proposal. The 6th item is to approve on a non binding advisory basis the frequency of future votes on the compensation of our named executive officers. The Board of Directors unanimously recommends that you select 1 year for this proposal. Has everyone had time to vote? The polls are about to close. It is now 9:10 a. M. Pacific Time, and I now declare the polls to be closed. Ms. Vico, could you please present the report of the Inspector of Elections? All right. Thank you, sir. Based on the preliminary results, each of the nominees for Director has received the affirmative vote of a majority of the votes cast and the appointment of Ernst and Young as the company's independent registered public accounting firm has also received the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at the meeting. The proposal regarding the Advanced Micro Devices Inc. 2,004 amended and restated equity incentive plan received the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at this meeting. The proposal regarding the Advanced Micro Devices Inc. 2017 employee stock purchase plan received the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at this meeting. The proposal concerning the advisory vote on the compensation of named executive officers received the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy at this meeting. The voting results for the proposal concerning the advisory non binding vote on the frequency of future say on pay votes are as follows: Approximately 89% of the shares voted for the 1 year option, 1% of the shares voted for the 2 year option and 10% of the shares voted for the 3 year option. Thank you, Ms. Fico. Based on the preliminary report of the Inspector, each of the nominees for Director has been elected. The appointment of Ernst and Young has been ratified. The proposal regarding the Advanced Micro Devices Inc. 2000 and 4 amended and restated equity incentive has been approved. The proposal regarding the Advanced Micro Devices, Inc. 2017 employee stock purchase plan has been approved. The proposal concerning the advisory vote on the compensation of named executive officers has been approved. And the proposal concerning the advisory non binding vote on the frequency of future say on pay votes has been approved for 1 year. The final report of the Inspector of Elections will be on file for inspection by stockholders. And the company will report the final results on a current report on Form 8 ks with the Securities and Exchange Commission within 4 business days. On behalf of Mr. Caldwell, the formal portion of the meeting is concluded. At this time, I would like to turn the floor over to AMD's President and Chief Executive Officer, Doctor. Lisa Su. Okay. Good morning. Thank you all for joining us today at our Annual Shareholders Meeting, and thanks to those who are joining us on the virtual meeting. I'm very excited to give you a report of what we're doing at AMD. Let me start first with just a little bit about our path and where our focus is. Our company is really about high performance technologies and building the greatest products for high performance computing. And our goals are often very ambitious, but we attack them with strong determination because we do believe that high performance computing is absolutely necessary as we look at what's happening in the industry over the next 5 to 10 years. When you look at our strategy and focus, it really is in 3 areas. 1st is graphics. Graphics is the key to many things, including all things related to visualization. And if you think about gaming, virtual and augmented reality and artificial intelligence, they all require high performance graphics. The second area of investment for us is in computing. And again, computing is at the center of all of the world's hardest problems. And if you think about computing in both client systems and the infrastructure and cloud, high performance computing really enables those systems to solve those problems. And then at AMD, we're very unique in that we can combine high performance graphics solutions with high performance computing to form integrated system solutions. And we use that in both helping our customers solve their problems as well as creating platforms where many, many users can develop on top of that. And so this really is the area where we think AMD can uniquely differentiate. Now if you look at 2016, 2016 was a good year for AMD. I'm very proud of our accomplishments across a number of different areas. And as we look at some of the key accomplishments, for us as a technology company, growth is at the center of what we're trying to achieve. And in 2016, we achieved 7% annual revenue growth. If you look across our product segments, we grew in each of our segments, both our Computing and Graphics segment as well as our Enterprise Embedded and Semi Custom segment. We returned positive annual free cash flow. We returned to non GAAP annual operating profitability. And from a total shareholder return standpoint, we were the best performing stock on the Semiconductor SOX Index. So all in all, we had a good year in 2016. If you look at where we are in the industry, I'm extremely proud of the progress we've made with key marquee customers in the industry. What I'd like to say is that AMD enables our customers to be at their best. And when you look at the customer set, whether you're talking about Sony or Microsoft on the game console side, HP, Dell, Lenovo, Apple and the Computing Systems side or recently, we've also announced some new relationships in cloud platforms with Google and several others. We view these as extremely important relationships for our success both on the business front as well as ensuring that our technology is always world class. So we very much want to continue these deep partnerships with our customers. Now looking at each of our business segments, we divide business into 2 segments. So the Computing and Graphics segment primarily services the PC portion of the industry. In this business, we grew annual revenue 9%. This is a significant achievement. Actually, it was the first time we've grown this business in a number of years. And we did this through gaining share with our products. With our mobile APUs, our 7th generation APUs, we grew 2.8 points of mobile PC share. And we have built we have launched systems with every major OEM in this area. On the Radeon Graphics side, as you might recall, in 2015, we formed the Radeon Technologies Group with the idea of putting a singular focus on graphics because we believe that this will be a growth market over the next 5 plus years. And with Radeon, we grew over 5 points of market share in this very important part of the business. So we're very pleased with that. And we're also expanding our graphics offerings, not only in Consumer, where we have a strong presence today, but also into the Professional Graphics segment. And we also had a strong annual sales growth in that market as well. So overall, we made good progress in the Computing and Graphics segment. Now moving over to the Enterprise Embedded and Semi Custom segment. We grew annual revenue 5% in this business. And this is a business where our game console revenue is the dominant piece of the revenue in EESC. Game consoles, this cycle have continued to be very strong. Last year, Sony launched their PlayStation 4 Pro, a mid generation kicker, which contributed to improved sales for us. And as Microsoft has announced this year, they will also be launching their mid cycle kicker in the game console market. And so again, it continues to be a strong market where IBM where AMD has very strong overall share. Now as we look at where we're going with this business, we really see a huge opportunity to reenter the server market, and this is very much of our focus in 2017. So 2017, for us, is about delivering our high performance computing products. This is the strongest lineup we have had in over a decade, and it comes from much of the engineering efforts that we've invested in over the last 4 to 5 years. And they include Ryzen, Radeon Vega, Naples as well as Radion Instinct, all in their own very, very interesting and important products for us. Now let me go through a little bit about each of these products. So Ryzen. Ryzen is our first product using the Zen Core. The Zen Core was a brand new from scratch design that we have worked on over the last 4 years. And with Ryzen and desktop, we have the world's fastest 8 core desktop processor. We launched Ryzen 7 on March 2, and we launched Ryzen 5 on April 11. And the overall reception from the market has been very strong. The performance has exceeded our expectations, and we have price performance leadership in the market. And so we're very pleased where Ryzen stands today. Moving on to our new Vega architecture. Our new Vega architecture is, again, a brand new architecture that was designed for the applications that are important over the next few years. And with this, we have new high bandwidth cache using high bandwidth memory. We have a new geometry pipeline. We have a new compute engine, a new pixel engine. And the key with Vega is it will go into multiple market segments for us. It will go into the gaming segment. It will go into the professional workstation segment. And it will also be key for machine learning going forward. And then finally, our Naples architecture for server is designed for the cloud error. What we have in Naples is the foundation of our high performance end core, which is also shared with Ryzen. But where we have more cores, more memory, more IO than our competition, we believe that this product is uniquely designed for both cloud and enterprise and will allow us to attack certain high growth workloads in the data center over the next several years. So with this, we will be giving more of an update on our long term strategy at our Financial Analyst Day on Tuesday, May 16, and we invite you to join us there. We'll talk about our market focus, we'll talk about our new products and we'll talk a bit more about our long term strategy. So with that, let me conclude and say we're very pleased with where the company is today. We also believe we have very strong growth opportunities going forward. Our vision is ambitious. We're committed to a multi generational road map. And more than that, we're committed to focus, speed and execution on both our engineering and customer requirements as well as our financial goals. With that, thank you very much, and we'll open it up for questions. Thank you. Ladies and gentlemen, if there are any questions in the room, we do have a standing microphone over here. You're welcome to come and stand over there. Lisa, we have a few questions online today. The first one is that AMD has significantly increased its cash balance in the last couple of years. Does the company have any plans to reduce its debt and or pay a dividend in the future? Yes. So we are pleased with the progress that we've made on the balance sheet. For a high-tech company, the balance sheet is very, very important to us. I think we will continue to look at opportunities to improve our balance sheet over time for a number of reasons. And from a dividend standpoint, we always look at all options. But from our standpoint today, with all of the growth opportunities we have, we would also like to continue to invest and invest more R and D in the business. And so that would be a key priority for us. Is there a question here in the room? Former analyst, semiconductor analyst, a little rusty at the point, but Phelps' name. On the faith of how you've turned this company around last couple of years without making an analysis, I began to accumulate and at this point finally got around to doing an analysis. To jump in to the quick question, it looks like at the gross margins and operating margins that we have and more or less the fixed costs of manufacturing, wafer manufacturing, it looks like the way forward to grow those, the top line as well as the margins in it is yield. And I don't know that you will be talking about that at the analyst meeting. Do you have an analyst meeting coming up soon? Yield and pricing power that is with the new products coming out, they may have a higher gross margin, but it might take quite a long time. So my, at this point, partially completed analysis is that we're stuck at $13 a share in that range for a long time. So with that in mind, I wonder if you have any comment or you would reserve that for the Analyst Meeting? Yes. Well, I'll make 1 or 2 comments, and then we'll certainly go into more detail at the Analyst Meeting in a few weeks. We definitely believe that when you look at our business model, top line revenue growth as well as bottom line profitability growth are key. And gross margins are certainly a key driver for that. To your comment on margin expansion, our long term target model is to be at 36% to 40% in terms of gross margin. And we believe that we're going to get there through the combination of stronger products that will give us the ASP lift that you talked about the pricing power as well as continuing to improve our cost structure and our overall manufacturability. So I think both are important. And certainly, we're very focused on both top line and bottom line growth. Thank you. And when is the analyst meeting? It is on May 16. Pardon? May 16. Okay. Thank you. Thank you. For the webcast, the Analyst Day is on Tuesday, May 16. Thank you, Lisa. We have a few more questions here. Kind of along those lines, one of the questions has to do with in terms of process technology and the work that we have we do with our foundries. Can you talk about some of the benefits of the recent WSA and the competitive advantage that, that agreement brings to us? Yes. So in terms of our foundry strategy, today, most of our products, certainly all the new products are in FinFET technology. So in 16 nanometer technology and 14 nanometer technology, we have stated that our intention is to skip 10 nanometer and our next generation will be in 7 nanometer technology. I think with our wafer supply agreement, GlobalFoundries is a very strong partner for us and will always continue to be a strong partner for us. But we are also looking at ensuring that we have access to technology alternatives in our process mix. Okay. And then following along on the competitive lines, there have been some items online talking about possibly a partnership with Intel with regard to GPU technology. Can you talk about the partnership strategy there or confirm that in any way? Yes. So we don't comment on rumors of any kind. I think what we have said publicly is that we will look at opportunities to selectively license our technologies and we view that as partnerships. So if there's an opportunity given our very unique IP for us to increase the number of users that are using AMD technology, then we will consider that, but we won't comment on any particular company. And then one more question here is what are your expectations for rise in momentum for the rest of the year? And particularly, when will you be rolling those out with OEMs? Yes. So as I said earlier, Ryzen has done well. The initial launch was Ryzen 7 and Ryzen 5. We will make more comments about the year as we go through our quarterly earnings call and our Financial Analyst Day. But we do expect that OEMs will be launching Ryzen in systems in the second quarter. Okay. So I think that's it for questions. Again, thank you all very much for joining our Annual Shareholders Meeting, and thank you for your support of AMD.