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AMD Reports 2014 Second Quarter Results

Transformation Strategy on Track

SUNNYVALE, CA -- (Marketwired) -- 07/17/14 -- AMD (NYSE: AMD)

Q2 2014 Results

  • Revenue of $1.44 billion, increased 3 percent sequentially and 24 percent year-over-year
  • Gross margin of 35 percent
  • Operating income of $63 million and non-GAAP(1) operating income of $67 million
  • Net loss of $36 million, loss per share of $0.05 and non-GAAP(1) net income of $17 million, earnings per share of $0.02

AMD (NYSE: AMD) today announced revenue for the second quarter of 2014 of $1.44 billion, operating income of $63 million and net loss of $36 million, or $0.05 per share. Non-GAAP operating income was $67 million and non-GAAP net income, which primarily excludes $49 million of loss from debt redemption in the quarter, was $17 million, or $0.02 per share.

"The second quarter capped off a solid first half of the year for AMD with strong revenue growth and improved financial performance," said Rory Read, AMD president and CEO. "Our transformation strategy is on track and we expect to deliver full year non-GAAP profitability and year-over-year revenue growth. We continue to strengthen our business model and shape AMD into a more agile company offering differentiated solutions for a diverse set of markets."


                           GAAP Financial Results

----------------------------------------------------------------------------
                                  Q2-14           Q1-14           Q2-13
----------------------------------------------------------------------------
Revenue                           $1.44B          $1.40B          $1.16B
----------------------------------------------------------------------------
Operating income (loss)            $63M            $49M           $(29)M
----------------------------------------------------------------------------
Net loss / Loss per share     $(36)M/$(0.05)  $(20)M/$(0.03)  $(74)M/$(0.10)
----------------------------------------------------------------------------


                        Non-GAAP Financial Results(1)

----------------------------------------------------------------------------
                                  Q2-14           Q1-14           Q2-13
----------------------------------------------------------------------------
Revenue                           $1.44B          $1.40B          $1.16B
----------------------------------------------------------------------------
Operating income (loss)            $67M            $66M           $(20)M
----------------------------------------------------------------------------
Net income (loss) / Earnings
 (loss) per share               $17M/$0.02      $12M/$0.02    $(65)M/$(0.09)
----------------------------------------------------------------------------

Quarterly Financial Summary

  • Gross margin was 35 percent in Q2 2014.
    • Gross margin was flat sequentially.
  • Cash, cash equivalents and marketable securities were $948 million at the end of the quarter, significantly higher than the target minimum of $600 million and close to the optimal zone of $1 billion.
  • Total debt at the end of the quarter was $2.21 billion, an increase from $2.14 billion at the end of Q1 2014.
    • During Q2 2014, the company continued re-profiling its near-term debt maturities, issuing $500 million in aggregate principal amount of 7.00% Senior Notes due 2024 and repurchasing all $452 million aggregate principal amount of the company's outstanding 8.125% Senior Notes due 2017.
  • Computing Solutions segment revenue increased 1 percent sequentially and decreased 20 percent year-over-year. The year-over-year decline was due to decreased microprocessor unit shipments.
    • Operating income was $9 million, an improvement from an operating loss of $3 million in Q1 2014 and operating income of $2 million in Q2 2013. The sequential increase was primarily driven by improved gross margin due to a richer mix of notebook products while the year-over-year increase was primarily driven by lower operating expenses.
    • Microprocessor average selling price (ASP) increased sequentially and year-over-year.
  • Graphics and Visual Solutions segment revenue increased 5 percent sequentially and 141 percent year-over-year driven largely by increased semi-custom SoC shipments. Graphics processor unit (GPU) revenue decreased sequentially and year-over-year, primarily due to a decrease in AIB channel sales, partially offset by increased sales of professional graphics and desktop OEM GPUs.
    • Operating income was $82 million compared with $91 million in Q1 2014 and breakeven in Q2 2013. The sequential decline was primarily due to lower GPU revenue, while the year-over-year increase was driven by increased sales of semi-custom SoCs.
    • GPU ASP decreased sequentially and year-over-year, primarily driven by lower AIB channel sales.

Recent Highlights

  • AMD unveiled further details on its ambidextrous computing roadmap, including a 64-bit ARM architecture license and plans to develop custom high-performance ARM and x86 processor cores for 2016. The company's differentiated x86 and ARM strategy is designed to deliver unmatched computing and graphics performance using a shared, flexible infrastructure to drive new innovations.
  • AMD appointed Dr. Lisa Su to Chief Operating Officer, responsible for overseeing the company's previously separate global operations, operating segments and sales organization to drive growth in both traditional PC and adjacent markets.
  • AMD realigned its organization structure to deliver unmatched customer value in both traditional PC markets and adjacent high-growth markets. Effective July 1, 2014, AMD's two new reportable segments are as follows:
    • Computing and Graphics segment, which will primarily include desktop and notebook processors and chipsets, discrete GPUs and professional graphics;
    • Enterprise, Embedded and Semi-Custom segment, which will primarily include server and embedded processors, dense servers, semi-custom SoC products, development services and technology for game consoles.
    • AMD's Quarterly Report on Form 10-Q for the quarter ended September 27, 2014 will reflect this new segment reporting structure.
  • AMD detailed its plans to accelerate the energy efficiency of its accelerated processing units (APUs) delivering 25x efficiency improvements by 2020 through design optimizations, intelligent power management and Heterogeneous System Architecture advances that are expected to enable AMD to outpace the industry's historical energy efficiency trend by at least 70 percent.
  • AMD continued to gain momentum with its embedded products in the second quarter.
  • AMD publicly demonstrated for the first time its 64-bit ARM-based AMD Opteron™ A-Series processor, codenamed "Seattle," a significant step forward in expanding the footprint of ultra-efficient 64-bit ARM solutions for cloud computing and the Internet of Things.
  • AMD expanded its mobile APU offerings in the quarter:
    • Acer, Dell, HP and Lenovo have all introduced notebooks powered by AMD's newest 3rd-generation mainstream mobile APUs, which combine category-leading compute performance(2,3) with unique features and rich user interactions.
    • AMD also launched its most advanced mobile APUs for consumer and commercial notebooks. The new 2014 performance mobile APUs include AMD's first FX-branded enthusiast class APU for notebooks as well as AMD Pro A-Series APUs. HP is offering the AMD PRO A-Series APUs across its Elite 700-Series notebooks, desktops and all-in-ones, with additional OEMs expected to introduce systems later this year.
  • AMD expanded its 2nd-generation Graphics Core Next-based professional graphics solutions with the introduction of the AMD FirePro W8100 professional graphics card, which delivers 38x more performance(4) than the closest competitive offerings based on double precision testing. Dell, HP and more than 10 workstation system integrators have all announced systems featuring the new card.
  • AMD's groundbreaking Mantle API, which creates more immersive experiences that take fuller advantage of modern APUs and GPUs to deliver console-like experiences, will be used by Electronic Arts in the upcoming Battlefield Hardline™, Dragon Age: Inquisition™ and Plants vs. Zombies: Garden Warfare™ games. More than 40 game titles supporting Mantle are in development with more than 50 developers actively working with the API for future titles.

Current Outlook

AMD's outlook statements are based on current expectations. The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under "Cautionary Statement" below.

For the third quarter of 2014, AMD expects revenue to increase 2 percent, plus or minus 3 percent, sequentially.

For additional details regarding AMD's results and outlook please see the CFO commentary posted at quarterlyearnings.amd.com.

AMD Teleconference

AMD will hold a conference call for the financial community at 2:30 p.m. PT (5:30 p.m. ET) today to discuss its second quarter financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its web site at www.amd.com. The webcast will be available for 12 months after the conference call.


Reconciliation of GAAP to Non-GAAP Operating
 Income (Loss)(1)
                                                 ---------------------------
(Millions)                                          Q2-14    Q1-14    Q2-13
----------------------------------------------------------------------------
GAAP operating income (loss)                      $     63 $     49 $   (29)
----------------------------------------------------------------------------
  Workforce rebalancing severance charges                -       14       -
----------------------------------------------------------------------------
  Amortization of acquired intangible assets             4        3       4
----------------------------------------------------------------------------
  Restructuring and other special charges, net           -        -       5
----------------------------------------------------------------------------
Non-GAAP operating income (loss)                  $     67 $     66 $   (20)
----------------------------------------------------------------------------


Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Loss)

                            ------------------------------------------------
(Millions except per share
 amounts)                         Q2-14           Q1-14           Q2-13
----------------------------------------------------------------------------
GAAP net loss / Loss per
 share                       $  (36) $(0.05) $  (20) $(0.03) $  (74) $(0.10)
----------------------------------------------------------------------------
  Workforce rebalancing
   severance charges              -       -      14    0.02       -       -
----------------------------------------------------------------------------
  Loss on debt redemption        49    0.06      15    0.02       -       -
----------------------------------------------------------------------------
  Amortization of acquired
   intangible assets              4    0.01       3    0.00       4    0.01
----------------------------------------------------------------------------
  Restructuring and other
   special charges, net           -       -       -       -       5    0.01
----------------------------------------------------------------------------
Non-GAAP net income (loss) /
 Earnings (loss) per share   $   17  $ 0.02  $   12  $ 0.02  $  (65) $(0.09)
----------------------------------------------------------------------------

About AMD
AMD (NYSE: AMD) designs and integrates technology that powers millions of intelligent devices, including personal computers, tablets, game consoles and cloud servers that define the new era of surround computing. AMD solutions enable people everywhere to realize the full potential of their favorite devices and applications to push the boundaries of what is possible. For more information, visit www.amd.com.

Cautionary Statement

This earnings press release contains forward-looking statements concerning AMD, its ability to deliver non-GAAP profitability and revenue growth; its ability to diversify its business; its targeted and optimal cash, cash equivalents and marketable securities balances; expected OEM introductions of its products and its expected third quarter of 2014 revenue; which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are commonly identified by words such as "believes, "expects," "may," "will," "should," "seeks," "intends," "pro forma," "estimates," "anticipates," "plans," "projects," "would" and other terms with similar meaning. Investors are cautioned that the forward-looking statements in this release are based on current beliefs, assumptions and expectations, speak only as of the date of this release and involve risks and uncertainties that could cause actual results to differ materially from current expectations. Risks include the possibility that Intel Corporation's pricing, marketing and rebating programs, product bundling, standard setting, new product introductions or other activities may negatively impact AMD's plans; that AMD will require additional funding and may be unable to raise sufficient capital on favorable terms, or at all; that customers stop buying AMD's products or materially reduce their operations or demand for AMD's products; that AMD may be unable to develop, launch and ramp new products and technologies in the volumes that are required by the market at mature yields on a timely basis; that AMD's third-party foundry suppliers will be unable to transition AMD's products to advanced manufacturing process technologies in a timely and effective way or to manufacture AMD's products on a timely basis in sufficient quantities and using competitive process technologies; that AMD will be unable to obtain sufficient manufacturing capacity or components to meet demand for its products or will not fully utilize its projected manufacturing capacity needs at GLOBALFOUNDRIES, Inc. (GF) microprocessor manufacturing facilities; that AMD's requirements for wafers will be less than the fixed number of wafers that it agreed to purchase from GF or GF encounters problems that significantly reduce the number of functional die it receives from each wafer; that AMD is unable to successfully implement its long-term business strategy; that AMD inaccurately estimates the quantity or type of products that its customers will want in the future or will ultimately end up purchasing, resulting in excess or obsolete inventory; that AMD is unable to manage the risks related to the use of its third-party distributors and add-in-board (AIB) partners or offer the appropriate incentives to focus them on the sale of AMD's products; that AMD may be unable to maintain the level of investment in research and development that is required to remain competitive; that there may be unexpected variations in market growth and demand for AMD's products and technologies in light of the product mix that it may have available at any particular time; that global business and economic conditions will not improve or will worsen; that PC market conditions, will not improve or will worsen; that demand for computers will be lower than currently expected; and the effect of political or economic instability, domestically or internationally, on AMD's sales or supply chain. Investors are urged to review in detail the risks and uncertainties in AMD's Securities and Exchange Commission filings, including but not limited to the Quarterly Report on Form 10-Q for the quarter ended March 29, 2014.

AMD, the AMD Arrow logo, AMD Opteron, AMD Radeon and combinations thereof, are trademarks of Advanced Micro Devices, Inc. Other names are for informational purposes only and used to identify companies and products and may be trademarks of their respective owner.


(1) In this earnings press release, in addition to GAAP financial results,
    AMD has provided non-GAAP financial measures including non-GAAP
    operating income (loss), non-GAAP net income (loss) and non-GAAP
    earnings (loss) per share. These non-GAAP financial measures reflect
    certain adjustments as presented in the tables in this earnings press
    release. AMD also provided Adjusted EBITDA and non-GAAP free cash flow
    as supplemental measures of its performance. These items are defined in
    the footnotes to the selected corporate data tables provided at the end
    of this earnings press release. AMD is providing these financial
    measures because it believes this non-GAAP presentation makes it easier
    for investors to compare its operating results for current and
    historical periods and also because AMD believes it assists investors in
    comparing AMD's performance across reporting periods on a consistent
    basis by excluding items that it does not believe are indicative of its
    core operating performance and for the other reasons described in the
    footnotes to the selected data tables. Refer to the data tables at the
    end of this earnings press release for additional AMD data.
(2) Testing conducted by AMD Performance Labs on optimized AMD reference
    systems. PC manufacturers may vary configuration yielding different
    results. Basemark CL is used to simulate compute performance; AMD A6-
    6310 APU scored 21 while the "Haswell U" Pentium part scored 3. AMD
    "Larne" reference platform system using AMD A6-6310 APU with AMD Radeon™
    R4 Graphics, 2x2048 MBytes of DDR3-1600 RAM, Microsoft Windows 8.1
    Single Language, and 13.300.0.0 - 13-Jan-2014 driver. Intel® Pentium®
    3556U @ 1.70GHz with Intel® HD Graphics, 2x2048 MBytes of DDR3-1600 RAM,
    Microsoft Windows 8.1 Single Language, 10.18.10.3412 - 28-Jan-2014
    driver. BMN-11
(3) Testing conducted by AMD Performance Labs on optimized AMD reference
    systems. PC manufacturers may vary configuration yielding different
    results. Basemark CL is used to simulate compute performance; A4 Micro-
    6400T APU scored 13 while the "Bay Trail T" platform scored 4. AMD
    "Discovery" reference platform system using AMD A4 Micro-6400T APU with
    Radeon™ R6 Graphics, 2048 MBytes of DDR3-
(4) SiSoftware Sandra test details: System Description: AMD FirePro W8100
    vs. Nvidia Quadro K5000 - Dell T3610, Intel Xeon E5-1620 v2 @ 3.60 GHz,
    8GB DDR3, Seagate HDD 7200RPM, Win7 64-bit SP1, 1920x1080 resolution.
    AMD Driver 13.352.1009 | Nvidia Driver 333.11


ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions except per share amounts and percentages)

                             Three Months Ended          Six Months Ended
                      -------------------------------  --------------------
                       Jun. 28,   Mar. 29,   Jun. 29,   Jun. 28,   Jun. 29,
                         2014       2014       2013       2014       2013

                      ---------  ---------  ---------  ---------  ---------

Net revenue           $   1,441  $   1,397  $   1,161  $   2,838  $   2,249

Cost of sales         $     943        910        702  $   1,853      1,345

                      ---------  ---------  ---------  ---------  ---------

Gross margin          $     498        487        459        985        904

Gross margin %               35%        35%        40%        35%        40%

Research and
 development          $     277        279        308        556        620

Marketing, general
 and administrative   $     154        156        171        310        350

Amortization of
 acquired intangible
 assets               $       4          3          4          7          9

Restructuring and
 other special
 charges, net         $       -          -          5          -         52

                      ---------  ---------  ---------  ---------  ---------

Operating income
 (loss)               $      63         49        (29)       112       (127)

Interest income       $       -          1          2          1          3
Interest expense      $     (46)       (47)       (42)       (93)       (86)
Other expense, net    $     (49)       (21)        (2)       (70)        (5)

                      ---------  ---------  ---------  ---------  ---------

Loss before income
 taxes                $     (32)       (18)       (71)       (50)      (215)

Provision for income
 taxes                $       4          2          3          6          5

                      ---------  ---------  ---------  ---------  ---------

Net loss              $     (36) $     (20) $     (74) $     (56) $    (220)


Net loss per share

  Basic               $   (0.05) $   (0.03) $   (0.10) $   (0.07) $   (0.29)

  Diluted             $   (0.05) $   (0.03) $   (0.10) $   (0.07) $   (0.29)

                      ---------  ---------  ---------  ---------  ---------

Shares used in per
 share calculation

  Basic                     764        761        752        762        751

  Diluted                   764        761        752        762        751

                      ---------  ---------  ---------  ---------  ---------



ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Millions)

                             Three Months Ended          Six Months Ended
                      -------------------------------  --------------------
                       Jun. 28,   Mar. 29,   Jun. 29,   Jun. 28,   Jun. 29,
                         2014       2014       2013       2014       2013

                      ---------  ---------  ---------  ---------  ---------

Total comprehensive
 loss                 $     (32) $     (21) $     (76) $     (53) $    (223)

                      ---------  ---------  ---------  ---------  ---------



ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions)

                                            ---------  ---------  ---------
                                             Jun. 28,   Mar. 29,   Dec. 28,
                                               2014       2014       2013

                                            ---------  ---------  ---------

Assets

Current assets:
  Cash and cash equivalents                 $     503  $     554  $     869
  Marketable securities                           445        348        228
  Accounts receivable, net                        872        840        832
  Inventories, net                                960        869        884
  Prepaid expenses and other current assets       152         79         71

                                            ---------  ---------  ---------

      Total current assets                      2,932      2,690      2,884

Long-term marketable securities                     -         80         90
Property, plant and equipment, net                329        337        346
Acquisition related intangible assets, net         72         75         78
Goodwill                                          553        553        553
Other assets                                      360        373        386
                                            ---------  ---------  ---------

Total Assets                                $   4,246  $   4,108  $   4,337
                                            =========  =========  =========

Liabilities and Stockholders' Equity

Current liabilities:
  Short-term debt                           $     101  $      60  $      60
  Accounts payable                                511        483        519
  Payable to GLOBALFOUNDRIES                      295        213        364
  Accrued and other current liabilities           480        482        530
  Deferred income on shipments to
   distributors                                   118        146        145

                                            ---------  ---------  ---------

      Total current liabilities                 1,505      1,384      1,618

Long-term debt                                  2,109      2,078      1,998
Other long-term liabilities                       131        135        177

Stockholders' equity:
  Capital stock:
    Common stock, par value                         8          8          7
    Additional paid-in capital                  6,905      6,883      6,894
    Treasury stock, at cost                      (114)      (114)      (112)
  Accumulated deficit                          (6,299)    (6,263)    (6,243)
  Accumulated other comprehensive income
   (loss)                                           1         (3)        (2)

                                            ---------  ---------  ---------

      Total stockholders' equity                  501        511        544

                                            ---------  ---------  ---------

Total Liabilities and Stockholders' Equity  $   4,246  $   4,108  $   4,337
                                            =========  =========  =========



ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
                                     Three Months Ended   Six Months Ended
                                     ------------------  ------------------
                                          Jun. 28,            Jun. 28,
                                            2014                2014

                                     ------------------  ------------------

Cash flows from operating
 activities:
  Net loss                           $              (36) $              (56)
  Adjustments to reconcile net loss
   to net cash used in operating
   activities:
    Depreciation and amortization                    53                 106
    Employee stock-based
     compensation expense                            21                  44
    Non-cash interest expense                         3                   9
    Loss on debt redemptions                         49                  64
    Other                                            (1)                 (4)
  Changes in operating assets and
   liabilities:
    Accounts receivable                             (32)                (40)
    Inventories                                     (90)                (76)
    Prepaid expenses and other
     assets                                         (75)                (84)
    Payable to GLOBALFOUNDRIES                       82                 (69)
    Accounts payable, accrued
     liabilities and other                           (2)               (126)
                                     ------------------  ------------------
Net cash used in operating
 activities                          $              (28) $             (232)
                                     ------------------  ------------------

Cash flows from investing
 activities:
  Purchases of property, plant and
   equipment                                        (23)                (44)
  Purchases of available-for-sale
   securities                                      (308)               (618)
  Proceeds from sale and maturity of
   available-for-sale securities                    288                 488
                                     ------------------  ------------------
Net cash used in investing
 activities                          $              (43) $             (174)
                                     ------------------  ------------------

Cash flows from financing
 activities:
  Net proceeds from foreign grants
   and allowances                    $                2  $                2
  Proceeds from issuance of common
   stock                                              1                   2
  Proceeds from borrowings, net                     491               1,080
  Repayments of long-term debt and
   capital lease obligations                       (473)             (1,042)
  Other                                              (1)                 (2)
                                     ------------------  ------------------
Net cash provided by financing
 activities                          $               20  $               40
                                     ------------------  ------------------
Net decrease in cash and cash
 equivalents                                        (51)               (366)
                                     ------------------  ------------------
Cash and cash equivalents at
 beginning of period                 $              554  $              869
                                     ------------------  ------------------
Cash and cash equivalents at end of
 period                              $              503  $              503
                                     ------------------  ------------------



ADVANCED MICRO DEVICES, INC.
SELECTED CORPORATE DATA
(Millions except headcount)


                                Three Months Ended         Six Months Ended
------------------------------------------------------     -----------------
                              Jun.     Mar.     Jun.         Jun.     Jun.
                              28,      29,      29,          28,      29,
Segment and Category
 Information                  2014     2014     2013         2014     2013

------------------------------------------------------     -----------------

 Computing Solutions (1)
  Net revenue               $   669  $   663  $   841      $ 1,332  $ 1,592
  Operating income (loss)   $     9  $    (3) $     2      $     6  $   (37)

 Graphics and Visual
  Solutions (2)
  Net revenue                   772      734      320        1,506      657
  Operating income               82       91        -          173       16

 All Other (3)
  Operating loss                (28)     (39)     (31)         (67)    (106)

 Total
  Net revenue               $ 1,441  $ 1,397  $ 1,161      $ 2,838  $ 2,249
  Operating income (loss)   $    63  $    49  $   (29)     $   112  $  (127)

------------------------------------------------------     -----------------

Other Data

 Depreciation and
  amortization, excluding
  amortization of acquired
  intangible assets         $    49  $    50  $    54      $    99  $   116
 Capital additions          $    23  $    21  $    28      $    44  $    48
 Adjusted EBITDA (4)        $   137  $   139  $    54      $   276  $    94
 Cash, cash equivalents and
  marketable securities     $   948  $   982  $ 1,117      $   948  $ 1,117
 Non-GAAP free cash flow
  (5)                       $   (51) $  (225) $   (63)     $  (276) $  (238)
 Total assets               $ 4,246  $ 4,108  $ 3,897      $ 4,246  $ 3,897
 Total debt                 $ 2,210  $ 2,138  $ 2,047      $ 2,210  $ 2,047
 Headcount                   10,300   10,397    9,928       10,300    9,928

------------------------------------------------------     -----------------



(1) Computing Solutions segment primarily includes x86 microprocessors, as
    standalone devices or as incorporated as an accelerated processing unit
    (APU), chipsets, embedded processors and dense servers.

(2) Graphics and Visual Solutions segment primarily includes graphics
    processing units (GPU), including professional graphics, semi-custom
    System-on-Chip (SOC) products, development services and technology for
    game consoles.

(3) All Other category primarily includes certain expenses and credits that
    are not allocated to any of the operating segments. Also included in
    this category are amortization of acquired intangible assets and
    employee stock-based compensation expense. In addition, the Company
    also included the following adjustments for the indicated periods: for
    the first quarter of 2014, the Company included an adjustment for
    workforce rebalancing severance charges and for the second quarter of
    2013 and six months ending June 29, 2013, the Company included an
    adjustment for net restructuring and other special charges. The Company
    also reports the results of former businesses in the All Other category
    because the operating results were not material.

(4) Reconciliation of GAAP operating income (loss) to Adjusted EBITDA*

                                Three Months Ended        Six Months Ended
                           ----------------------------  ------------------
                           Jun. 28,  Mar. 29,  Jun. 29,  Jun. 28,  Jun. 29,
                             2014      2014      2013      2014      2013
                           --------  --------  --------  --------  --------
    GAAP operating income
     (loss)                $     63  $     49  $    (29) $    112  $   (127)
      Workforce
       rebalancing                                    -                   -
       severance charges          -        14                  14
      Depreciation and
       amortization              49        50        54        99       116
      Employee stock-based
       compensation
       expense                   21        23        20        44        44
      Amortization of
       acquired intangible
       assets                     4         3         4         7
                                                                          9
      Restructuring and
       other special                                  5                  52
       charges, net               -         -                   -
                           --------  --------  --------  --------  --------
    Adjusted EBITDA        $    137  $    139  $     54  $    276  $     94
                           ========  ========  ========  ========  ========


(5) Non-GAAP free cash flow reconciliation**

                                Three Months Ended        Six Months Ended
                           ----------------------------  ------------------
                           Jun. 28,  Mar. 29,  Jun. 29,  Jun. 28,  Jun. 29,
                             2014      2014      2013      2014      2013
                           --------  --------  --------  --------  --------
    GAAP net cash used in
     operating activities  $    (28) $   (204) $    (35) $   (232) $   (190)
      Purchases of
       property, plant and
       equipment                (23)      (21)      (28)      (44)      (48)
                           --------  --------  --------  --------  --------
    Non-GAAP free cash
     flow                  $    (51) $   (225) $    (63) $   (276) $   (238)
                           ========  ========  ========  ========  ========


    * The Company presents Adjusted EBITDA as a supplemental measure of its
    performance. Adjusted EBITDA for the Company is determined by adjusting
    operating income (loss) for depreciation and amortization, employee
    stock-based compensation expense and amortization of acquired
    intangible assets. In addition, the Company also included the following
    adjustments for the indicated periods: for the first quarter of 2014,
    the Company included an adjustment for workforce rebalancing severance
    charges and for second quarter of 2013 and six months ending June 29,
    2013, the Company included an adjustment for net restructuring and
    other special charges. The Company calculates and communicates Adjusted
    EBITDA in the earnings press release because the Company's management
    believes it is of importance to investors and lenders in relation to
    its overall capital structure and its ability to borrow additional
    funds. In addition, the Company presents Adjusted EBITDA because it
    believes this measure assists investors in comparing its performance
    across reporting periods on a consistent basis by excluding items that
    the Company does not believe are indicative of its core operating
    performance. The Company's calculation of Adjusted EBITDA may or may
    not be consistent with the calculation of this measure by other
    companies in the same industry. Investors should not view Adjusted
    EBITDA as an alternative to the GAAP operating measure of operating
    income (loss) or GAAP liquidity measures of cash flows from operating,
    investing and financing activities. In addition, Adjusted EBITDA does
    not take into account changes in certain assets and liabilities as well
    as interest and income taxes that can affect cash flows.

    ** The Company also presents non-GAAP free cash flow in the earnings
    press release as a supplemental measure of its performance. Non-GAAP
    free cash flow is determined by adjusting GAAP net cash used in
    operating activities for capital expenditures. The Company calculates
    and communicates non-GAAP free cash flow in the financial earnings
    press release because the Company's management believes it is of
    importance to investors to understand the nature of these cash flows.
    The Company's calculation of non-GAAP free cash flow may or may not be
    consistent with the calculation of this measure by other companies in
    the same industry. Investors should not view non-GAAP free cash flow as
    an alternative to GAAP liquidity measures of cash flows from operating
    activities. The Company has provided reconciliations within the
    earnings press release of these non-GAAP financial measures to the most
    directly comparable GAAP financial measures.

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Cloud Expo Breaking News
Cloud Computing is evolving into a Big Three of Amazon Web Services, Google Cloud, and Microsoft Azure. Cloud 360: Multi-Cloud Bootcamp, being held Nov 4–5, 2014, in conjunction with 15th Cloud Expo in Santa Clara, CA, delivers a real-world demonstration of how to deploy and configure a scalable and available web application on all three platforms. The Cloud 360 Bootcamp, led by Janakiram MSV, an analyst with Gigaom Research, is the first bootcamp that introduces the core concepts of Infrastructure as a Service (IaaS) based on the workings of the Big Three platforms – Amazon EC2, Google Compute Engine, and Azure VMs. Bootcamp attendees will get to see the big picture and also receive the knowledge needed to make the best cloud decisions for their business applications and entire enterprise IT organization.
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using the URL as a basic building block, we open this up and get the same resilience that the web enjoys.
The Internet of Things is a natural complement to the cloud and related technologies such as Big Data, analytics, and mobility. In his session at Internet of @ThingsExpo, Joe Weinman will lay out four generic strategies – digital disciplines – to exploit emerging digital technologies for strategic advantage. Joe Weinman has held executive leadership positions at Bell Labs, AT&T, Hewlett-Packard, and Telx, in areas such as corporate strategy, business development, product management, operations, and R&D.
SYS-CON Events announced today that DevOps.com has been named “Media Sponsor” of SYS-CON's “DevOps Summit at Cloud Expo,” which will take place on June 10–12, 2014, at the Javits Center in New York City, New York. DevOps.com is where the world meets DevOps. It is the largest collection of original content relating to DevOps on the web today Featuring up-to-the-minute news, feature stories, blogs, bylined articles and more, DevOps.com is where the thought leaders of the DevOps movement make their ideas known.
There are 182 billion emails sent every day, generating a lot of data about how recipients and ISPs respond. Many marketers take a more-is-better approach to stats, preferring to have the ability to slice and dice their email lists based numerous arbitrary stats. However, fundamentally what really matters is whether or not sending an email to a particular recipient will generate value. Data Scientists can design high-level insights such as engagement prediction models and content clusters that allow marketers to cut through the noise and design their campaigns around strong, predictive signals, rather than arbitrary statistics. SendGrid sends up to half a billion emails a day for customers such as Pinterest and GitHub. All this email adds up to more text than produced in the entire twitterverse. We track events like clicks, opens and deliveries to help improve deliverability for our customers – adding up to over 50 billion useful events every month. While SendGrid data covers only abo...
SYS-CON Events announced today that the Web Host Industry Review has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Since 2000, The Web Host Industry Review has made a name for itself as the foremost authority of the Web hosting industry providing reliable, insightful and comprehensive news, reviews and resources to the hosting community. TheWHIR Blogs provides a community of expert industry perspectives. The Web Host Industry Review Magazine also offers a business-minded, issue-driven perspective of interest to executives and decision-makers. WHIR TV offers on demand web hosting video interviews and web hosting video features of the key persons and events of the web hosting industry. WHIR Events brings together like-minded hosting industry professionals and decision-makers in local communities. TheWHIR is an iNET Interactive property.
SYS-CON Events announced today that O'Reilly Media has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. O'Reilly Media spreads the knowledge of innovators through its books, online services, magazines, and conferences. Since 1978, O'Reilly Media has been a chronicler and catalyst of cutting-edge development, homing in on the technology trends that really matter and spurring their adoption by amplifying "faint signals" from the alpha geeks who are creating the future. An active participant in the technology community, the company has a long history of advocacy, meme-making, and evangelism.
SYS-CON Events announced today that Verizon has been named “Gold Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Verizon Enterprise Solutions creates global connections that generate growth, drive business innovation and move society forward. With industry-specific solutions and a full range of global wholesale offerings provided over the company's secure mobility, cloud, strategic networking and advanced communications platforms, Verizon Enterprise Solutions helps open new opportunities around the world for innovation, investment and business transformation. Visit verizonenterprise.com to learn more.
SYS-CON Events announced today that TMCnet has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Technology Marketing Corporation (TMC) is the world's leading business to business and integrated marketing media company, servicing niche markets within the communications and technology industries.
"In my session I spoke about enterprise cloud analytics and how we can leverage analytics as a service," explained Ajay Budhraja, CTO at the Department of Justice, in this SYS-CON.tv interview at the 14th International Cloud Expo®, held June 10-12, 2014, at the Javits Center in New York City. Cloud Expo® 2014 Silicon Valley, November 4–6, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading Cloud industry players in the world.
“We are starting to see people move beyond the commodity cloud and enterprises need to start focusing on additional value added services in order to really drive their adoption," explained Jason Mondanaro, Director of Product Management at MetraTech, in this SYS-CON.tv interview at the 14th International Cloud Expo®, held June 10-12, 2014, at the Javits Center in New York City. Cloud Expo® 2014 Silicon Valley, November 4–6, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading Cloud industry players in the world.
"We are automated capacity control software, which basically looks at all the supply and demand and running a virtual cloud environment and does a deep analysis of that and says where should things go," explained Andrew Hillier, Co-founder & CTO of CiRBA, in this SYS-CON.tv interview at the 14th International Cloud Expo®, held June 10-12, 2014, at the Javits Center in New York City. Cloud Expo® 2014 Silicon Valley, November 4–6, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading Cloud industry players in the world.
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity. In his session at Internet of @ThingsExpo, Mac Devine, Distinguished Engineer at IBM, will discuss bringing these three elements together via Systems of Discover.
The Internet of Things promises to transform businesses (and lives), but navigating the business and technical path to success can be difficult to understand. In his session at 15th Internet of @ThingsExpo, Chad Jones, Vice President, Product Strategy of LogMeIn's Xively IoT Platform, will show you how to approach creating broadly successful connected customer solutions using real world business transformation studies including New England BioLabs and more.
All too many discussions about DevOps conclude that the solution is an all-purpose player: developer and operations guru, complete with pager for round-the-clock duty. For most organizations that is not the way forward. In his session at DevOps Summit, Bernard Golden, Vice President of Strategy at ActiveState, will discuss how to achieve the agility and speed of end-to-end automation without requiring an organization stocked with Supermen and Superwomen.