On Jan. 17, processor peddler Advanced Micro Devices (NYSE: AMD) released earnings for the 2007 fiscal year, which ended Dec. 29.

  • Back out noncash goodwill impairment charges of $1.61 billion in the fourth quarter and ... well, 2007 still doesn't look good. Sans that massive item, the operating margin for the year was around (21%), and the net margin would be (29.4%).
  • A $614 million investment from a Dubai-based investor group helped stabilize the balance sheet, though AMD had to dilute the stock to meet its end of the bargain. And a heavy debt load still hangs over the company like the sword over Damocles.
  • On the bright side, AMD had $114 million of positive operating cash flow in the fourth quarter and came within $9 million of breaking even on a non-GAAP operating basis.

(Figures in millions, except per-share data. Data uses the latest reported numbers from Capital IQ, a division of Standard & Poor's.)

Income Statement Highlights

FY 2007

FY 2006

Change

Sales

$6,013

$5,649

6.4%

Net Profit

($3,379)

($166)

(1,935%)

Earnings Per Share

($6.06)

($0.34)

(1,682%)

Diluted Shares

558

492

13.4%

Get back to basics with the income statement.

Margin Checkup

FY 2007

FY 2006

Change*

Gross Margin

37.6%

50.0%

(12.4)

Operating Margin

(47.7%)

7.6%

(55.3)

Net Margin

(56.2%)

(2.9%)

(53.3)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

FY 2007

FY 2006

Change

Cash Plus Short-Term Investments

$1,889

$1,541

22.6%

Accounts Receivable

$640

$1,140

(43.9%)

Inventory

$821

$814

0.9%

Liabilities

FY 2007

FY 2006

Change

Accounts Payable

$1,009

$1,338

(24.6%)

Long-Term Debt

$5,031

$3,672

37.0%

The balance sheet reflects the company's health.

Cash Flow Highlights

FY 2007

FY 2006

Change

Cash From Operations

($257)

$1,287

N/A

Capital Expenditures

$1,686

$1,856

(9.2%)

Free Cash Flow

($1,943)

($569)

(241.5%)

Owner Earnings

($2,356)

($1,231)

(91.4%)

Free cash flow is a Fool's best friend.

Competitive Context

Market Cap

Trailing P/E Ratio

CAPS Rating

Intel (Nasdaq: INTC)

$113,490

16.5

****

Texas Instruments (NYSE: TXN)

$41,470

17.0

****

NVIDIA (Nasdaq: NVDA)

$13,780

21.6

*****

Broadcom (Nasdaq: BRCM)

$12,770

81.70

***

AMD

$3,910

NA

**

Keep your partners close and the competition in your vest pocket.

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