AGM 2015

Apr 29, 2015

Corporate Governance Committee. I'd like to call this meeting to order and welcome you to AMD's Annual Meeting of Stockholders. I'd also like to welcome stockholders attending our virtual meeting, which is streaming live online. We want to make our meeting as accessible as possible to our shareholders, and we're pleased to give all of you the opportunity to vote or ask questions either here in person or via the Internet. I'd like to introduce to you the other Board Committee Chairs who are here with me today. Please stand when I call your name. Mr. John E. Caldwell, Chairman of the Compensation Committee Mr. Nicholas M. D'Onofrio, Chair of the Innovation and Technology Committee and Doctor. W. Michael Barnes, Chair of the Audit and Finance Committee. Mike, stay standing. Before continuing, I want to recognize Doctor. Barnes, who after having served on AMD's Board since 2003, chose not to stand for reelection this year. I'd like to thank Mike for his service, his dedication to AMD's Board for the past 12 years. Thanks, Mike. I'd also like to introduce our President and Chief Executive Officer, Doctor. Lisa Su our Senior Vice President and Chief Financial Officer, Mr. Devinder Kumar and our Senior Vice President, General Counsel and Secretary, Mr. Harry Wollan. This morning, we'll first take care of the formal business of the meeting, then Doctor. Su will give her report. We'll also provide time for any questions you might have of our directors and officers. In addition, representative of Ernst and Young, our independent auditors are available for questions. The meeting is now called to order. And as Chairman, I designate Mr. Harry Wallen as Secretary of the meeting. Mr. Wollan will now conduct the formal portion of the meeting. Mr. Wollan? Good morning. As set forth in the notice of the meeting, the official business to be conducted is as follows. 1st, to elect the 11 director nominees named in the 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 Advanced Micro Devices Inc. 2,004 Equity Incentive Plan. 4th, to approve on a non binding advisory basis the compensation of our named executive officers. And finally, to transact any other business that may properly come before this meeting. Following 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 the 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 period ended December 27, 2014. Please note that non GAAP financial measures referenced during Doctor. Su's report are reconciled to their most directly comparable GAAP financial measures in the slide deck. And finally, please hold your questions until after Doctor. Sue's report. Now returning to the business of the meeting. I've been authorized by the Board of Directors to appoint Mr. William Marsh of IVS Associates as Inspector of Elections for the meeting. Mr. Marsh will determine the number of chairs represented at the meeting, the validity of proxies, the existence of a quorum and the number of votes on all matters voted upon at this meeting. Before we proceed further, is there anyone present who is meeting. Any online participants who wish to vote at this meeting should also do so now by clicking the Vote Here button. The Board of Directors fixed the close of business on March 2, 2015 is a record date for determination of stockholders entitled to notice of 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 770,000,000 736,008 shares outstanding on the record date and entitled to vote at this meeting. The 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 first mailed on March 18, 2015 to all stockholders of record on March 2, 2015. 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 601,000,000, 1986,000 983 shares of the company's voting stock were present, representing 77.29 percent of the outstanding shares of common stock as of March 2, 2015. Based on this number, a quorum was present. I now declare the polls open. I expect polls to close in approximately 10 minutes. A copy of the minutes of the annual meeting of stockholders of Advanced Micro Devices held on May 8, 2014 is at the registration desk for inspection by any stockholder who wishes to inspect it. 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 2015 proxy statement. The 11 individuals that have been nominated for election are Mr. John E. Caldwell, Mr. Henry W. K. Chau, Mr. Bruce L. Claflin, Ms. Nora M. Denzel, Mr. Nicholas M. D'Onofrio Mr. Martin L. Edelman Mr. John R. Harding Mr. Joseph A. Householder Mr. Michael J. Ingalls, Doctor. Lisa T. Hsu and Mr. Ahmed Yahia. The Board of Directors unanimously amends that you vote for the election of each of these directors. AMD has adopted a majority voting standard for the election of directors with respect to uncontested elections such as this one. The standard requires each director to receive a majority of votes cast to be elected. I now declare the nominations closed. The second item is a ratification of the appointment of Ernst and Young as independent registered public accounting firm for the company for the current year. The vote required to approve this proposal is the affirmative vote of a majority of shares of common stock entitled to vote and represented in person or by proxy at this meeting. The Board of Directors unanimously recommends 4 ratification. The third item is to approve the imminent and restatement of Advanced Micro Devices Inc. 2,004 Equity Incentive Plan to amend the existing plan to increase the number of shares authorized for issuance under the 2,004 plan by 20,000,000 shares, increase the limits on the number of authorized shares that may be awarded to a service provider in a calendar year or during his or her initial 12 months of service and require a 1 year minimum vesting period for awards granted under the 2004 plan subject to limited exceptions. The vote required to prove this proposal is the affirmative vote of a majority of the shares of common stock entitled to vote and represent it in person or by proxy at the meeting. The Board of Directors unanimously recommends that you vote for this amendment and restatement. The 4th item is to approve on a non binding advisory basis, the compensation of our named executive officers as disclosed in the 2015 proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission. The vote required to approve this proposal on a non binding advisory basis is the affirmative vote of a majority of the shares of common stock entitled to vote and represent it in person or by proxy at this meeting. The Board of Directors unanimously recommends that you vote for this approval. I now direct the Inspector of Elections to conduct the voting of the items now before the meeting. 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. If there is anyone present who has not filed a proxy and wishes to do so, please do that now. If there is anyone present who wishes to withdraw his or her proxy and vote personally by ballot, please see Mr. Marsh at the back of the room. Any online participants who wish to vote at this meeting should also do so now by clicking the Vote Here button. It is now 10:11 A. M. Eastern Time and I now declare the polls to be closed. Mr. Marsh, can you please present the report of the Inspector of Elections? Yes, Mr. Mullen. I am pleased to announce that each of the nominees for Director has been elected by the affirmative vote of a majority of votes cast and the appointment of Ernst and Young as the company's independent registered public accounting firm has been ratified by 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 in 2004 amended and restated Equity Tenant Plan passed by the affirmative vote of a majority of the shares of common stock entitled to vote and represented in person or by proxy compensation of named executive officers passed by 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. If there are any stockholders interested in the vote tallies on specific items, you may see me after the meeting for the results. Thank you, Mr. Marsh. The report of the Inspector of Elections will be on file for inspection by stockholders. On behalf of Mr. Claflin, the formal portion of the meeting is concluded. At this time, we'll show a brief video followed by remarks from AMD's President and Chief Executive Officer, Doctor. Lisa T. Su. We're dreamers, innovators, pioneers. Together, we are AMD. What we do is much bigger than technology. We're driven to make our industry a better place. We envision the future users walk and turn those dreams into reality. We are bold, imaginative, unconstrained by convention. It's in our DNA. Together, we pioneer technology that frees people to push the limits of what is possible because we believe that when you give people the freedom to innovate today, amazing things will happen tomorrow. At AMD, we design, we integrate, and we innovate. We do this every day, and we make it happen. We are AMD, enabling today, inspiring tomorrow. Good morning, and thank you all for attending our shareholder meeting both in person and online. I'm deeply honored to be here today as it's my 1st shareholder meeting as AMD's President and CEO. So what I'd like to do is give you a little bit of a report on where we are as a company, our accomplishments in 2014, our focus in 2015 and then we will be happy to take questions from the audience both online and in person. So to start, Maybe we can get the slides. There we go. To start, as you saw in the video, AMD really is a company of rich heritage and innovation. And what we see here is we have a history of 45 years of always being on the leading edge of technology and that is something that we're very proud of. If you think of the highest points for AMD, it's when we put out the latest generation technology as we were the first to a gigahertz processor, a first for dual core X86 processors, a first as we looked at bringing industry's first quad core technology to market and then most recently with our wins in the game consoles. This is the heritage that we have and it's what we will have reshaped our business in a significant way over the past couple of years. We have now really organized the business in 2 complementary business segments. The first business segment is our Computing and Graphics business. Our Computing and Graphics business has historically serviced the PC portion of the market. And we have desktop and notebook processors, chipsets, discrete graphics as well as professional graphics in this segment of the market. Our new segment is our Enterprise Embedded and Semi Custom business. And this is a business that we're quite proud of in terms of our growth over the past several years. It is a set of newer markets for us and markets that we believe will sustain growth going forward. These include our server processors, embedded processors, our semi custom SoCs, which include those products that go into game consoles, as well as engineering services and royalties. So the idea that AMD can form deep customer engagements where we can actually be co engineering with customers is one of the key areas where we can differentiate ourselves and has helped us with these key customer relationships. Now a few of the highlights for each of the businesses. In the Computing and Graphics segment, our focus has been on leading generation APU technology, technology that combines our Computing and Graphics capability onto both single chips as well as in discrete chips. And what we have seen in 2014 is that we've made progress in this segment. We've increased our mobile average selling prices in these devices as well as our revenue. And we have a richer mix of higher end products, which means that our products are going into more sophisticated systems as they move forward. We've also successfully doubled our commercial design wins. And when you look at the history of AMD in the Computing segment, we've been primarily in the lower end of the consumer devices. And by increasing our commercial design wins, we will increase the balance of our business. We've also grown our professional graphics revenue by over 20%. And the marquee design win there is one that we have with Apple in terms of their Mac Pro devices, which are very sophisticated engineering workstations. And much of our work in this area has also been to rightsize our investments to ensure that the R and D and the overall investments in this segment are coincident with where we think the market is going as we move forward. In the Enterprise Embedded and Semi Custom segment, we have seen very substantial growth. In 2014, we actually grew this business by over 50% to a $2,400,000,000 business. In particular, this is highlighted by the Sony and Microsoft game consoles, which doubled their units annually. We've also increased our embedded processor revenue, which has been substantial and added really a different set of customers to AMD's customer set, including customers like Airbus, Arista, Boeing and QNAP to broaden our overall portfolio. We will continue to drive this segment going forward as it's a large piece of our growth over the next several years. So if you look at the progress overall, you'll see that when we looked at our revenue in 2012 comparing our Computing Graphics business to our Enterprise Embedded and Semi Custom business, we were over 90% in Computing Graphics in 2012. Over the last several years, we've successfully diversified the business so that ending 2014, we were about sixty-forty. And as we go towards the end of 2015 into 2016, we believe that mix will be around fifty-fifty going forward. So this is right on track with where we expect it to be for this revenue diversification. Now moving on to 2015. We reported our Q1 financial results several weeks ago And the Q1 of 2015 did start off slow. There were several factors for this some were macroeconomic factors particularly with some of the weaker currencies. There were also several market related factors relative to the PC market being slower than expected in the Q1 of 2015. As a result, our financial results were revenue of 1,030,000,000 dollars and we showed a non GAAP net income loss. This is certainly something that we would not like to do and we'll continue to work on some of the strategic areas to improve our profitability going forward. These include reducing our AMD downstream channel inventory. We certainly made progress on that in the Q1 of 2015 and we will continue to do that as we go through the Q2 of 2015. We also made a strategic decision to exit the server systems business. This was part of our C Micro acquisition several years ago. And this was upon looking at our overall portfolio where we believe that we would get the most benefit in terms of our both core competencies dollars for future growth. We are very focused on ensuring that we are putting enough R and D investment into the key growth areas for us and those include X86 and Arm Server and Enterprise products that we believe will drive future growth going forward. Our 2015 focus are in several areas. We will be doing a very comprehensive view of our long term strategy next week actually here in New York at our Financial Analyst Day. So I'll be very brief on the on these focus items. But there are a couple of areas. First of all, placing the PC business on a healthy trajectory is obviously important for us. We do expect the second half of twenty fifteen to be stronger than the into our business. So these are things like our FX products and our Pro products that go into the commercial business. In terms of a strong product portfolio, we're getting ready to launch several new products in the coming weeks. And so we're excited about those product launches and you'll be hearing more about them as those launch. And then, of course, investing and building next generation products at our core to ensure that we continue the innovation going forward. So with that, I'll conclude my presentation and say, from a long term terms of ensure that we're delivering long term revenue and profitability growth. In terms of the areas that we are focused on as a company and when I started as CEO, where I would like our employees to focus, it's really very simple in getting back to the basics of running a technology company. Without a doubt building great products is our number We have 6,000 engineers within AMD and they are all focused on ensuring that happens. And that is a very it's very rewarding to work with them actually in terms of their progress there. Driving deeper customer relationships is also important for us moving our business from less of a transactional focus into more of a strategic focus with our customers. We are at our best when we're innovating with our customers And we have shown tremendous value when we do that and we'll continue to do that going forward. And then finally simplifying our business, we are from one sense of word a company who has a 45 year history. This is our opportunity to also remake the next number of years for us by simplifying our overall operations. With that, that concludes my presentation. Thank you very much for your attention. We'll now take questions. We have members of the Board, officers of the company and Ernst and Young, our independent auditors. Will also be happy to respond to any questions whether they are here in the room or they're submitted online. Questions? If you would be an investor, would you buy AMD today and tell me why? Thank you for that question. I'm sorry, did we need him to repeat? Just with the microphone, excuse us. Just with the microphone. If you would be an investor, would you buy AMD today and why? Well, I think that's a great question. And I think I am an investor all of us are investors. The reason to buy AMD is really we have a tremendous set of technology and IP assets that are very, very unique in the industry. And with that capability and where the industry is going, we can use those assets to drive shareholder value. And when I talk about that, I mean it in a very broad sense. So the semiconductor industry is one that is driving many of the things that are changing the way we live every day. If you think about everything that's happened in over the last 20 years with semiconductor innovation, there's very strong capabilities that will be delivered over the next 5 to 10 years in that innovation. In terms of high performance processors, graphics and visualization technology and our ability to integrate that, I think our assets are quite unique. What we need to do with those assets is put them over higher growth market segments. And that is the transition that we're making as a company. But that's why I believe investors should invest in AMD and that is the roadmap that we're laying out for the next 3 to 5 years. Thank you. Thank you. How has corporate culture changed since you took over as CEO? So it's a great question, and it's one that has surprised me a little bit in the sense that the corporate culture does change. You would think with a company that's 10,000 people it would change slowly, but I think it actually changes relatively substantially. When I talk about product focus, what I mean is more than a piece of hardware, but it's how we deliver the full end user experience to our customers. Actually, I'll tell you a little story. For our AMD executive team, we have a monthly operations meeting. And one of the things that I did in my 1st months as CEO was insist that we spend a lot of time actually hands on with our products at the senior executive level, because it gives us an opportunity to give tremendous feedback to the team, while they're developing the products. So that's a key piece of the culture. I think the other piece is from an engineering standpoint, we're here to build things and ensuring that we've removed all of the barriers on what it takes to build things is what I'm focused on. Lisa, we have some questions coming in online. Okay. Well, the rest of the room is thinking about some more questions. You point to 2015 being sort of some near term challenges. And one of our holders would like to know what kind of product launches that you also referenced do you have coming this year that will help address some of those challenges? Is there any incremental details you can provide? Yes. So, as I mentioned, we will be giving, a fairly detailed product update next week at our Financial Analyst Day. But in terms of the key products for 2015, we will be launching Carrizo, our 6th generation APU. We believe this is the strongest mobile processor certainly from our lineup, but competes very well with Broadwell. And we will be showing some head to head demos around how that works. We will also be launching next generation graphics technology and that will significantly improve our lineup across the board in our graphics both OEM as well as channel business. And We'll also be launching Seattle, which is our Opteron based ARM based server chip as well. And that will go into production this year. Great. And we have another one online in terms of recognizing how the team has re profiled that to be further out than previously. But cash has declined more recently. And is that something we should be concerned about as shareholders? And do you So So clearly, our overall cash balance is an important metric for us as we go forward. I think we've done a very good job the past several years in terms of both cash management as well as re profiling the debt. So that will continue to be a focus as we go through the next several quarters to ensure that it is not a concern. Devinder? Alina, you might pass Devinder the mic. Yes. I think from a cash standpoint, as Lisa said, if you go back and look at the last several years, we've managed the cash well within the optimal range between $900,000,000 and $1,000,000,000 The other thing we have done specifically is as we had the 2013 2014 timeframe, we repropiled the debt. We have no significant near term debt maturities. In fact, May 1, we pay off $42,000,000 of the convertible note that's left over. And if you look at the debt profile structure all the way until 2019, there is no term debt maturities and that should help us very much in terms of managing our cash from a long term standpoint. Thank you. Are there any other questions in the room? If not, great. I was wondering if you could comment on your ARM server development? Yes. So the ARM server development is our ship code named Seattle. That has that started sampling last year, actually the first half of last year. And it has been widely deployed in software vendors as well as OEMs and system partners. So we have gotten a lot of feedback on the ARM server development. Some of it has been very positive in the sense of how quickly we were able to bring up operating systems and applications on ARM based servers. We've also gotten some feedback on some areas that we've needed to improve. And so those are on the next generation and those will launch into production in the second half of twenty fifteen. Any other questions from the floor? Okay. Lisa that completes the question and answer session and I'll hand it back to you to close. Very good. Well again thank you very much for attending our annual shareholders meetings as I started. It's really an honor to be here and I look forward to many years in sharing our progress with you each year. Thank you.