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AMD revenue falls as PC sales continue to fall

SUNNYVALE, CA -- (Marketwired) -- Jan 20, 2015 -- AMD (NASDAQ: AMD) today announced revenue for the fourth quarter of 2014 of $1.24 billion, operating loss of $330 million and net loss of $364 million, or $0.47 per share. Non-GAAP(1) operating income was $36 million, non-GAAP(1) net income of $2 million and breakeven non-GAAP(1) earnings per share.

GAAP Financial Results

                                                                            
----------------------------------------------------------------------------
               Q4-14        Q3-14      Q4-13         2014          2013     
----------------------------------------------------------------------------
Revenue       $1.24B        $1.43B     $1.59B       $5.51B        $5.30B    
----------------------------------------------------------------------------
Operating     $(330)M        $63M      $135M       $(155)M         $103M    
income                                                                      
(loss)                                                                      
----------------------------------------------------------------------------
Net          $(364)M/       $17M/      $89M/       $(403)M/        $(83)M/  
income       $(0.47)        $0.02      $0.12       $(0.53)         $(0.11)  
(loss) /
Earnings                                                                    
(loss)                                                                      
per share                                                                   
----------------------------------------------------------------------------
                                                                            

Non-GAAP Financial Results(1)

                                                                            
----------------------------------------------------------------------------
                  Q4-14       Q3-14       Q4-13       2014         2013     
----------------------------------------------------------------------------
Revenue          $1.24B      $1.43B      $1.59B      $5.51B       $5.30B    
----------------------------------------------------------------------------
Operating         $36M        $66M        $91M        $235M        $103M    
income (loss)                                                               
----------------------------------------------------------------------------
Net income      $2M/$0.00  $20M/$0.03  $45M/$0.06  $51M/$0.06 $(83)M/$(0.11)
(loss) /                                                                    
Earnings                                                                    
(loss) per                                                                  
share                                                                       
----------------------------------------------------------------------------
                                                                            

"We made progress diversifying our business, ramping design wins and improving our balance sheet this past year despite challenges in our PC business," said Dr. Lisa Su, AMD president and CEO. "Annual Enterprise, Embedded and Semi-Custom segment revenue increased over 50% as customer demand for products powered by our high-performance compute and rich visualization solutions was strong. We continue to address channel headwinds in the Computing and Graphics segment and are taking steps to return it to a healthy trajectory beginning in the second quarter of 2015."

Financial Segment Summary

Recent Highlights

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 Q1 2015, AMD expects revenue to decrease 15 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 fourth quarter and annual financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at www.amd.com. The webcast will be available for 12 months after the conference call.

Reconciliation of GAAP to Non-GAAP Gross Margin

                                                                            
                           -------------------------------------------------
(Millions except                                                            
 percentages)                Q4-14     Q3-14     Q4-13      2014      2013  
----------------------------------------------------------------------------
GAAP gross margin          $     360 $     494 $     553 $   1,839 $   1,978
----------------------------------------------------------------------------
GAAP gross margin %              29%       35%       35%       33%       37%
----------------------------------------------------------------------------
  Lower of cost or market                                                   
   inventory adjustment    $      58         -         - $      58         -
----------------------------------------------------------------------------
Non-GAAP gross margin      $     418 $     494 $     553 $   1,897 $   1,978
----------------------------------------------------------------------------
Non-GAAP gross margin %          34%       35%       35%       34%       37%
----------------------------------------------------------------------------
                                                                            

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

                                                                            
                       -----------------------------------------------------
(Millions)               Q4-14      Q3-14     Q4-13       2014       2013   
----------------------------------------------------------------------------
GAAP operating income                                                       
 (loss)                $    (330) $      63 $     135  $    (155) $     103 
----------------------------------------------------------------------------
  Goodwill impairment        233          -         -        233          - 
----------------------------------------------------------------------------
  Restructuring and                                                         
   other special                                                            
   charges, net               71          -         -         71         30 
----------------------------------------------------------------------------
  Lower of cost or                                                          
   market inventory                                                         
   adjustment                 58          -         -         58          - 
----------------------------------------------------------------------------
  Amortization of                                                           
   acquired intangible                                                      
   assets                      4          3         4         14         18 
----------------------------------------------------------------------------
  Workforce rebalancing                                                     
   severance charges           -          -         -         14          - 
----------------------------------------------------------------------------
  Legal settlements,                                                        
   net                         -          -       (48)         -        (48)
----------------------------------------------------------------------------
Non-GAAP operating                                                          
 income                $      36  $      66 $      91  $     235  $     103 
----------------------------------------------------------------------------
                                                                            

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

                                                                            
               -------------------------------------------------------------
(Millions                                                                   
 except per                                                                 
 share amounts)        Q4-14                Q3-14              Q4-13        
----------------------------------------------------------------------------
GAAP net income                                                             
 (loss) /                                                                   
 earnings                                                                   
 (loss) per                                                                 
 share         $    (364) $   (0.47) $     17 $    0.02 $     89  $   0.12  
----------------------------------------------------------------------------
  Goodwill                                                                  
   impairment        233       0.30         -         -        -         -  
----------------------------------------------------------------------------
  Restructuring                                                             
   and other                                                                
   special                                                                  
   charges, net       71       0.09         -         -        -         -  
----------------------------------------------------------------------------
  Lower of cost                                                             
   or market                                                                
   inventory                                                                
   adjustment         58       0.07         -         -        -         -  
----------------------------------------------------------------------------
  Amortization                                                              
   of acquired                                                              
   intangible                                                               
   assets              4       0.00         3      0.00        4      0.00  
----------------------------------------------------------------------------
  Workforce                                                                 
   rebalancing                                                              
   severance                                                                
   charges             -          -         -         -        -         -  
----------------------------------------------------------------------------
  Loss on debt                                                              
   redemption          -          -         -         -        -         -  
----------------------------------------------------------------------------
  Legal                                                                     
   settlements,                                                             
   net                 -          -         -         -      (48)    (0.06) 
----------------------------------------------------------------------------
Non-GAAP net                                                                
 income (loss)                                                              
 / earnings                                                                 
 (loss) per                                                                 
 share         $       2  $    0.00  $     20 $    0.03 $     45  $   0.06  
----------------------------------------------------------------------------
                                                                            

                                                          
               -------------------------------------------
(Millions                                                 
 except per                                               
 share amounts)        2014                  2013         
----------------------------------------------------------
GAAP net income                                           
 (loss) /                                                 
 earnings                                                 
 (loss) per                                               
 share         $    (403) $   (0.53) $     (83) $   (0.11)
----------------------------------------------------------
  Goodwill                                                
   impairment        233       0.30          -          - 
----------------------------------------------------------
  Restructuring                                           
   and other                                              
   special                                                
   charges, net       71       0.09         30       0.04 
----------------------------------------------------------
  Lower of cost                                           
   or market                                              
   inventory                                              
   adjustment         58       0.07          -          - 
----------------------------------------------------------
  Amortization                                            
   of acquired                                            
   intangible                                             
   assets             14       0.02         18       0.02 
----------------------------------------------------------
  Workforce                                               
   rebalancing                                            
   severance                                              
   charges            14       0.02          -          - 
----------------------------------------------------------
  Loss on debt                                            
   redemption         64       0.08          -          - 
----------------------------------------------------------
  Legal                                                   
   settlements,                                           
   net                 -          -        (48)     (0.06)
----------------------------------------------------------
Non-GAAP net                                              
 income (loss)                                            
 / earnings                                               
 (loss) per                                               
 share         $      51  $    0.06  $     (83) $   (0.11)
----------------------------------------------------------
                                                          

About AMD

AMD (NASDAQ: 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 and the conference call remarks contain forward-looking statements concerning AMD; its expected first quarter of 2015 revenue; the trajectory of the Computing and Graphics segment; and the features, functionality and availability of its future products, 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 the completion and impact of the 2014 restructuring plan and AMD's transformation initiatives could adversely affect AMD; 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 September 27, 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, non-GAAP net income (loss), non-GAAP earnings (loss) per share and non-GAAP gross margin. 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.
2. Intel Core i7 4690X with 16GB DDR3-1866, AMD Radeon™ R9 290X Windows 8.1 64-bit comparing launch drivers 13.12 and 14.501. All tests run at 3840x2160. Bioshock Infinite @ ultra scored 30.47 vs 36.24.
3. AMD A10 7850K with R7 graphics, 2x4GB DDR3 2400, Windows 8.1 64-bit comparing Catalyst drivers 14.2 and 14.50. In Batman Arkham Origins @ 1080P, PHYSX=off GEOMETRYDETAIL=normal DYNAMICSHADOWS=normal MOTIONBLUR=off DOF=normal DISTORTION=off LENSFLARES=off LIGHTSHAFTS=off REFLECTIONS=off AO=normal we see an uplift from 34.96FPS to 45.2FPS.
4. FreeSync is an AMD technology designed to reduce or eliminate screen tears in games and videos by allowing the monitor's refresh rate to be controlled by and synchronized to the Radeon R-series graphics card or APU Radeon R-series graphics. Requires DisplayPort 1.2a compliant monitors that support DisplayPort Adaptive-Sync and an AMD desktop 2014 A-series APU with Radeon R-series graphics, with forthcoming FreeSync-enabled driver. Support for use with multiple monitors planned. Confirm supported technologies with system manufacturer before purchase.

                                                                            
                                                                            
ADVANCED MICRO DEVICES, INC.                                                
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                             
(Millions except per share amounts and percentages)                         
                                                                            
                                Three Months Ended           Year Ended     
                           ----------------------------  ------------------ 
                           Dec. 27,  Sep. 27,  Dec. 28,  Dec. 27,  Dec. 28, 
                             2014      2014      2013      2014      2013   
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
Net revenue                $  1,239  $  1,429  $  1,589  $  5,506  $  5,299 
                                                                            
Cost of sales                   879       935     1,036     3,667     3,321 
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
Gross margin                    360       494       553     1,839     1,978 
                                                                            
Gross margin %                   29%       35%       35%       33%       37%
                                                                            
Research and development        238       278       293     1,072     1,201 
                                                                            
Marketing, general and                                                      
 administrative                 144       150       169       604       674 
                                                                            
Amortization of acquired                                                    
 intangible assets                4         3         4        14        18 
                                                                            
Restructuring and other                                                     
 special charges, net            71         -         -        71        30 
                                                                            
Goodwill impairment charge      233         -         -       233         - 
                                                                            
Legal settlements, net            -         -       (48)        -       (48)
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
Operating income (loss)        (330)       63       135      (155)      103 
                                                                            
Interest income                   1         1         1         3         5 
Interest expense                (41)      (43)      (44)     (177)     (177)
Other income (expense),                                                     
 net                              3        (2)       (2)      (69)       (5)
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
Income (loss) before                                                        
 income taxes                  (367)       19        90      (398)      (74)
                                                                            
Provision (benefit) for                                                     
 income taxes                    (3)        2         1         5         9 
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
Net income (loss)          $   (364) $     17  $     89  $   (403) $    (83)
                           ========  ========  ========  ========  ======== 
                                                                            
                                                                            
Net income (loss) per                                                       
 share                                                                      
                                                                            
  Basic                    $  (0.47) $   0.02  $   0.12  $  (0.53) $  (0.11)
                                                                            
  Diluted                  $  (0.47) $   0.02  $   0.12  $  (0.53) $  (0.11)
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
Shares used in per share                                                    
 calculations                                                               
                                                                            
  Basic                         776       770       759       768       754 
                                                                            
  Diluted                       776       785       766       768       754 
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
                                                                            
                                                                            
ADVANCED MICRO DEVICES, INC.                                                
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)            
(Millions)                                                                  
                                                                            
                                Three Months Ended           Year Ended     
                           ----------------------------  ------------------ 
                           Dec. 27,  Sep. 27,  Dec. 28,  Dec. 27,  Dec. 28, 
                             2014      2014      2013      2014      2013   
                                                                            
                           --------  --------  --------  --------  -------- 
                                                                            
Total comprehensive income                                                  
 (loss)                    $   (368) $     15  $     89  $   (406) $    (82)
                           --------  --------  --------  --------  -------- 
                                                                            
                                                                            
                                                                            
ADVANCED MICRO DEVICES, INC.                                                
CONDENSED CONSOLIDATED BALANCE SHEETS                                       
(Millions)                                                                  
                                                                            
                                               --------  --------  -------- 
                                               Dec. 27,  Sep. 27,  Dec. 28, 
                                                 2014      2014      2013   
                                                                            
                                               --------  --------  -------- 
                                                                            
Assets                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                    $    805  $    640  $    869 
  Marketable securities                             235       298       228 
  Accounts receivable, net                          818       973       832 
  Inventories, net                                  685       897       884 
  Prepaid expenses and other current assets         193       212        71 
                                                                            
                                               --------  --------  -------- 
                                                                            
      Total current assets                        2,736     3,020     2,884 
                                                                            
Long-term marketable securities                       -         -        90 
Property, plant and equipment, net                  302       328       346 
Acquisition related intangible assets, net           65        69        78 
Goodwill                                            320       553       553 
Other assets                                        344       355       386 
                                               --------  --------  -------- 
                                                                            
Total Assets                                   $  3,767  $  4,325  $  4,337 
                                               ========  ========  ======== 
                                                                            
Liabilities and Stockholders' Equity                                        
                                                                            
Current liabilities:                                                        
  Short-term debt                              $    177  $    102  $     60 
  Accounts payable                                  421       498       519 
  Payable to GLOBALFOUNDRIES                        212       317       364 
  Accrued and other current liabilities             558       555       530 
  Deferred income on shipments to distributors       72        94       145 
                                                                            
                                               --------  --------  -------- 
                                                                            
      Total current liabilities                   1,440     1,566     1,618 
                                                                            
Long-term debt                                    2,035     2,106     1,998 
Other long-term liabilities                         105       118       177 
                                                                            
Stockholders' equity:                                                       
  Capital stock:                                                            
    Common stock, par value                           8         8         7 
    Additional paid-in capital                    6,949     6,928     6,894 
    Treasury stock, at cost                        (119)     (118)     (112)
  Accumulated deficit                            (6,646)   (6,282)   (6,243)
  Accumulated other comprehensive loss               (5)       (1)       (2)
                                                                            
                                               --------  --------  -------- 
                                                                            
      Total stockholders' equity                    187       535       544 
                                                                            
                                               --------  --------  -------- 
                                                                            
Total Liabilities and Stockholders' Equity     $  3,767  $  4,325  $  4,337 
                                               ========  ========  ======== 
                                                                            
                                                                            
                                                                            
ADVANCED MICRO DEVICES, INC.                                                
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                              
(Millions)                                                                  
                                                        Three               
                                                       Months               
                                                        Ended    Year Ended 
                                                     ----------  ---------- 
                                                      Dec. 27,    Dec. 27,  
                                                        2014        2014    
                                                                            
                                                     ----------  ---------- 
                                                                            
Cash flows from operating activities:                                       
  Net Loss                                           $     (364) $     (403)
  Adjustments to reconcile net loss to net cash                             
   provided by (used in) operating activities:                              
    Depreciation and amortization                            48         203 
    Employee stock-based compensation expense                16          81 
    Non-cash interest expense                                 6          17 
    Net (gain) loss on debt redemptions                      (3)         61 
    Goodwill impairment charge                              233         233 
    Restructuring and other special charges, net             14          14 
    Other                                                    (4)        (13)
  Changes in operating assets and liabilities:                              
    Accounts receivable                                     151           7 
    Inventories                                             213         199 
    Prepaid expenses and other assets                        36        (120)
    Payable to GLOBALFOUNDRIES                             (106)       (153)
    Accounts payable, accrued liabilities and other        (124)       (224)
                                                     ----------  ---------- 
Net cash provided by (used in) operating activities  $      116  $      (98)
                                                     ----------  ---------- 
                                                                            
Cash flows from investing activities:                                       
  Purchases of property, plant and equipment                (22)        (95)
  Purchases of available-for-sale securities               (144)       (790)
  Proceeds from the sales and maturities of                                 
   available-for-sale securities                            209         873 
                                                     ----------  ---------- 
Net cash provided by (used in) investing activities  $       43  $      (12)
                                                     ----------  ---------- 
                                                                            
Cash flows from financing activities:                                       
  Net proceeds from grants and allowances            $        3  $        8 
  Proceeds from issuance of common stock                      -           4 
  Proceeds from borrowings, net                              75       1,155 
  Repayments of long-term debt and capital lease                            
   obligations                                              (72)     (1,115)
  Other                                                       -          (6)
                                                     ----------  ---------- 
Net cash provided by financing activities            $        6  $       46 
                                                     ----------  ---------- 
Net increase (decrease) in cash and cash equivalents        165         (64)
                                                     ----------  ---------- 
Cash and cash equivalents at beginning of period     $      640  $      869 
                                                     ----------  ---------- 
Cash and cash equivalents at end of period           $      805  $      805 
                                                     ----------  ---------- 
                                                                            
                                                                            
                                                                            
ADVANCED MICRO DEVICES, INC.                                                
SELECTED CORPORATE DATA                                                     
(Millions except headcount)                                                 
                                                                            
                                                                            
                               Three Months Ended            Year Ended     
-------------------------------------------------------  -------------------
                                                                            
Segment and Category      Dec. 27,  Sep. 27,  Dec. 28,   Dec. 27,  Dec. 28, 
 Information                2014      2014      2013       2014      2013   
                                                                            
-------------------------------------------------------  -------------------
                                                                            
  Computing and Graphics                                                    
   (1)                                                                      
    Net revenue           $    662  $    781  $    888   $  3,132  $  3,720 
    Operating loss        $    (56) $    (17) $    (15)  $    (76) $   (101)
                                                                            
  Enterprise, Embedded                                                      
   and Semi-Custom (2)                                                      
    Net revenue                577       648       699      2,374     1,577 
    Operating income           109       108       129        399       295 
                                                                            
  All Other (3)                                                             
    Net revenue                  -         -         2          -         2 
    Operating income                                                        
     (loss)                   (383)      (28)       21       (478)      (91)
                                                                            
  Total                                                                     
    Net revenue           $  1,239  $  1,429  $  1,589   $  5,506  $  5,299 
    Operating income                                                        
     (loss)               $   (330) $     63  $    135   $   (155) $    103 
                                                                            
-------------------------------------------------------  -------------------
                                                                            
Other Data                                                                  
                                                                            
  Depreciation and                                                          
   amortization,                                                            
   excluding amortization                                                   
   of acquired intangible                                                   
   assets                 $     44  $     46  $     50   $    189  $    218 
  Capital additions       $     22  $     29  $     21   $     95  $     84 
  Adjusted EBITDA (4)     $     96  $    133  $    165   $    505  $    412 
  Cash, cash equivalents                                                    
   and marketable                                                           
   securities, including                                                    
   long-term marketable                                                     
   securities             $  1,040  $    938  $  1,187   $  1,040  $  1,187 
  Non-GAAP free cash flow                                                   
   (5)                    $     94  $    (11) $      0   $   (193) $   (232)
  Total assets            $  3,767  $  4,325  $  4,337   $  3,767  $  4,337 
  Total debt              $  2,212  $  2,208  $  2,058   $  2,212  $  2,058 
  Headcount                  9,687    10,149    10,671      9,687    10,671 
                                                                            
-------------------------------------------------------  -------------------
                                                                            
(1) Computing and Graphics segment primarily includes desktop and notebook  
    processors, chipsets, discrete graphics processing units (GPUs) and     
    professional graphics.                                                  
                                                                            
(2) Enterprise, Embedded and Semi-Custom segment primarily includes server  
    and embedded processors, dense servers, 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 for the indicated periods: for fourth quarter of 
    2014, the Company included a goodwill impairment, net restructuring and 
    other special charges and a lower of cost or market inventory           
    adjustment; for 2014, the Company included a goodwill impairment, net   
    restructuring and other special charges, a lower of cost or market      
    inventory adjustment, loss on debt repurchase and workforce rebalancing 
    severance charges; for the fourth quarter of 2013, the Company included 
    net legal settlements; and for 2013, the Company included net           
    restructuring and other special charges and net legal settlements.      
                                                                            
(4) Reconciliation of GAAP operating income (loss) to Adjusted EBITDA*      
                                Three Months Ended           Year Ended     
                           ----------------------------  ------------------ 
                           Dec. 27,  Sep. 27,  Dec. 28,  Dec. 27,  Dec. 28, 
                             2014      2014      2013      2014      2013   
                           --------  --------  --------  --------  -------- 
    GAAP operating income                                                   
     (loss)                $   (330) $     63  $    135  $   (155) $    103 
      Goodwill impairment       233         -         -       233         - 
        Restructuring and                                                   
         other special                                                      
         charges, net            71         -         -        71        30 
        Lower of cost or                                                    
         market inventory                                                   
         adjustment              58         -         -        58         - 
        Employee stock-                                                     
         based                                                              
         compensation                                                       
         expense                 16        21        24        81        91 
        Amortization of                                                     
         acquired                                                           
         intangible assets        4         3         4        14        18 
        Depreciation and                                                    
         amortization            44        46        50       189       218 
      Workforce                                                             
       rebalancing                                                          
       severance charges          -         -         -        14         - 
        Legal settlements,                                                  
         net                      -         -       (48)        -       (48)
                           --------  --------  --------  --------  -------- 
    Adjusted EBITDA        $     96  $    133  $    165  $    505  $    412 
                           ========  ========  ========  ========  ======== 
                                                                            
                                                                            
(5) Non-GAAP free cash flow reconciliation**                                
                                Three Months Ended           Year Ended     
                           ----------------------------  ------------------ 
                           Dec. 27,  Sep. 27,  Dec. 28,  Dec. 27,  Dec. 28, 
                             2014      2014      2013      2014      2013   
                           --------  --------  --------  --------  -------- 
    GAAP net cash provided                                                  
     by (used in)                                                           
     operating activities  $    116  $     18  $     21  $    (98) $   (148)
      Purchases of                                                          
       property, plant and                                                  
       equipment                (22)      (29)      (21)      (95)      (84)
                           --------  --------  --------  --------  -------- 
    Non-GAAP free cash                                                      
     flow                  $     94  $    (11) $      0  $   (193) $   (232)
                           ========  ========  ========  ========  ======== 
                                                                            
                                                                            
    * 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 fourth quarter of 2014, the  
    Company included an adjustment for goodwill impairment, net             
    restructuring and other special charges and lower of cost or market     
    inventory adjustment; for 2014, the Company included an adjustment for  
    goodwill impairment, net restructuring and other special charges, lower 
    of cost or market inventory adjustment and workforce rebalancing        
    severance charges; for the fourth quarter of 2013, the Company included 
    an adjustment for net legal settlements; and for 2013, the Company      
    included adjustments for net restructuring and other special charges    
    and net legal settlements. 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 provided by     
    (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.