Good day, ladies and gentlemen, and thank you for your patience. You have joined AMD's Fourth Quarter and Year-End earnings Conference Call. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the call over to your host, Director of Investor Relations, Ms. Liz Morali. Please wait just a moment for Ms. Morali to begin.

Thank you. Fourth quarter and year-end conference call. By now, you should have had the opportunity to review a copy of our earnings release and the CFO commentary and slides. If you have not reviewed these documents, they can be found on AMD's website at ir.amd.com. Participants on today's conference call are: Lisa Su, our President and Chief Executive Officer; and Devinder Kumar, our Senior Vice President, Chief Financial Officer and Treasurer. This is a live call and will be replayed via webcast on amd.com. I would like to highlight a few dates for you. Mark Papermaster, Senior Vice President and CTO, will present at the Morgan Stanley Technology, Media and Telecom Conference on March 3, in San Francisco. And our first quarter quiet time will begin at the close of business on Friday, March 11, 2016. Before we begin, let me remind everyone that today's discussions contains forward-looking statements based on the environment as we currently see it. Those statements are based on current beliefs, assumptions and expectations, speak only as of the current date, and as such, involve risks and uncertainties that could cause actual results to differ materially from our current expectations. Additionally, please note that we will be referring to non-GAAP figures during this call, except for revenue, which is on a GAAP basis. The non-GAAP financial measures referenced are reconciled to their most directly comparable GAAP financial measure in the press release and CFO commentary posted on our website at quarterlyearnings.amd.com. Please refer to the cautionary statements in today's earnings press release and CFO commentary for more information. You'll also find detailed discussions about our risk factors in our filings with the SEC, and in particular, AMD's quarterly report on Form 10-Q for the quarter ended September 26, 2015. With that, I will hand the call over to Lisa. Lisa?

Thank you, Liz, and good afternoon to all those listening in today. While 2015 was a challenging year from a financial perspective, the dedicated commitment of our employees, combined with our long-term technology investments and sharpened focus have created a strong foundation for future growth. In the fourth quarter, revenue decreased 10% sequentially to $958 million as seasonally lower semi-custom SoC shipments were partially offset by the second straight quarter of double-digit percentage revenue growth in our Computing and Graphics business. Looking at our Computing and Graphics segment. Revenue increased 11% sequentially as we continued to improve the performance of our PC business. We had strong double-digit sequential percentage growth in mobile APU sales driven largely by increased Carrizo shipments and good sell-through of AMD-based PCs on Black Friday. In the channel, we delivered our third straight quarter of sequential revenue growth and further reduced downstream product inventories based on improved demand for FX CPUs and A-series APUs. We also made progress diversifying our client Computing revenue as we further expand into the commercial PC market. Second-half 2015 commercial APU unit shipments increased more than 15% from the first half of the year. We believe we can continue to grow our commercial shipments based on the high volume wins we are securing both across large enterprises and the public sector. Now shifting to Graphics. GPU revenue increased sequentially for the second straight quarter, driven by improved AIB channel sales of our Radeon 300 series across the enthusiast, performance and mainstream segments, and growth in Professional Graphics sales. The PC gaming market strength helped fuel a richer GPU mix and improved demand for our high end Radeon R9 series in the quarter. We expect this momentum to continue throughout 2016 as Oculus and HTC begin shipping consumer-ready VR headsets. The buzz…

Thank you, Lisa, and good afternoon, everyone. In 2015, notwithstanding a difficult PC market and financial losses, we continued our multiyear efforts to transition our business model by diversifying revenue and establishing a foundation for improved financial performance. We made progress in stabilizing the Computing and Graphics segment and achieve strong double-digit percentage revenue growth in the second half of 2015. We also reduced overall channel inventory significantly from the prior year. In our EESC segment, we had record shipments of our semi-custom SoCs powering the PlayStation 4 and Xbox One game consoles. In total, against the backdrop of a 28% revenue decline from 2014, we reduced a cost profile with a 14% decrease in OpEx, managed our inventory down and maintain our cash well within our target range of $600 million to $1 billion. Now let me provide the specifics of the fourth quarter. Revenue was $958 million, down 10% sequentially, driven primarily by seasonably lower sales of semi-custom SoCs, partially offset by higher Computing and Graphics segment sales. The year-over-year decline was 23%, due primarily to lower client processor and chipset sales and lower game console royalties. Gross margin was 30%, a 7 percentage point improvement from the prior quarter with 6 percentage points resulting from the impact of a $65 million inventory write-down in Q3 and the remainder, primarily from improved product mix in the Computing and Graphics segment. Operating expenses were $323 million, down $13 million from the prior quarter, primarily due to lower headcount and ongoing expense control. Operating loss was $39 million and net loss was $79 million with loss per share of $0.10 calculated using 791 million shares. Net interest, other expense and taxes were $40 million in the quarter compared to $39 million in the prior quarter. The GAAP results include a…

Thank you, Devinder. Operator, can you please poll the audience for questions?

[Operator Instructions] So we'll take our first question from David Wong from Wells Fargo.

I've been looking at your guidance for growth, year-over-year growth in revenue in 2016. You're starting the -- well, you're ending 20 -- with the last quarter, your game console revenue is down year-over-year. Do you expect the game console revenues to grow in 2016 as a whole? And what other things will drive overall growth for 2016?

Yes. So David, thanks for the question. So let me give you a bit of a color on sort of the guidance and how we view 2016. So if you look at overall 2016, we do expect to grow revenue, and if you look at our business, we see -- certainly, the second half of revenue will be stronger than the first half because of both of our businesses. Game consoles, we see units going up 2016 to 2015. We've also said in the Enterprise, Embedded and Semi-Custom segment that we will be ramping some new design revenue in the second half of '16. So we see that as a positive growth driver. And then if you look overall at our Computing and Graphics business, we do believe even in a down PC market that we have the opportunity to gain share as a growth vector in our Computing and Graphics. So those are all the overall drivers for the 2016 comments.

Okay. Great. And just a quick follow-up. I understand that you don't break out all the details, but can you give us some feeling as to whether your discrete GPU business is showing year-over-year growth at the moment either in the December quarter or expected for the March quarter.

Yes. So as you say, we don't go into that level of detail. I think what we have said is that we did see growth in our discrete Graphics business sequentially in both Q3 and Q4. As we look into 2016 with our discrete Graphics business, we have a strong product portfolio. In particularly, the ramp and the introduction of our new FinFET products, code-named Polaris, will happen in the middle of 2016. So that'll be a '16 growth driver. So certainly, we've seen some sequential improvement in the second half of 2015 and we look forward to those product releases in 2016.

And our next question is from Ian Ing from MKM Partners.

Could you talk more about the channel business in light of your cautious comments on macro in China. I mean are you seeing weakness potentially in the ODM business or the white-box market?

Yes. So Ian, I think overall, if you look at the channel business in the second half of the year for us, second half '15 relative to first half '15, we have made quite a bit of progress in the channel in terms of just overall inventory levels. We saw a good quarter in the fourth quarter in both North America and Europe. We did see a degradation in China towards the end of the fourth quarter, and I think there are cautious comments throughout the industry about sort of the early 2016 start for China. So I think overall, what I would say is I'm pleased with the progress we've made in the channel. I think in both the desktop channel as well as the AIB channel, we've made some progress in the second half of the year. I think China is a factor as we go into the first quarter. But I think overall, we still view the channel as a positive business for AMD and one in which we believe we can grow share.

Okay, great. And then Devinder, your OpEx guidance range, $320 million to $340 million in the coming quarters, I mean, can you give us a sense of the timing of some of the upcoming mask costs given you've got Zen-based cores and Polaris coming up.

Yes, I would say -- I think you hit the nail on the head. There are new products coming out and there are some masked [ph] head costs, I think that's more weighted towards later in the year from a Q1 timeframe, we have given the guidance on the OpEx at the $320 million level compared to where we ended up in Q4 of 2015. So yes, we do have support for the investments in the products we need and in particular, the technology and product transitions that we have coming out in 2016. And that's why you see a range in OpEx of between $320 million and $340 million. And then the last factor that obviously, affects the OpEx is obviously, the revenue profile, which as Lisa said earlier, is stronger in the second half of the year than the first half of the year.

Okay. And my last question, you're talking about some GPU share gains in 2016, I mean does -- so a lot of that come from the Polaris launch starting midyear or is that sort of sustained business from the R9 series or a combination?

Yes. So we have made some progress in with the R9 series particularly in the fourth quarter. I think as we go forward, it's a combination of things. If you look at our investment in Graphics, they really include both hardware and software. So the Polaris family is excellent from a hardware standpoint in terms of the performance-per-watt that we get. But we have a number of software initiatives that we started over the past couple of months and will continue. And we see all of those contributing to the Graphics momentum.

Our next question is from Sanjay Chaurasia from Nomura.

Devinder, one question on gross margin. I noticed that you're not providing gross margin guidance for '16. And I was wondering if you have clarity that your revenue would be up year-on-year. What are some of the puts and takes here that's making you hold gross margin guidance?

I think the key is if you look at -- if you look back over the last few quarters, we have made progress on the gross margin front, ending Q4 2015 at the 30% level and the guidance specifically for Q1 of 2016 is 32%. You're right, I haven't given guidance for the year, but some of the puts and takes are really the mix of product as we get into the -- more into 2016. And then obviously, the mix of business between our Computing and Graphics segment and the EESC segment. In Computing and Graphics, we have introduced some new products in the second half of '15 and even going into '16, and you have some of the commercial success we have had and that obviously, helps gross margin. But at the same time, we want to see how the year unfolds in particular on the PC side of the house given some of the comments we made about caution in China in particular. So for the year, I'm not giving guidance today. This is kind of first quarter guidance at the 32% for gross margin and we'll get to the year as we get into the next 1 or 2 quarters.

Okay. And then as a follow-up, Lisa, a question on ARM servers. You indicated you're shipping your Seattle. But at the same time in your guidance, you didn't mention anything about ARM contributing in '16, and my question is ARM servers a meaningful strategy for you in '17 and '18?

Yes, so Sanjay, the ARM server did start shipments and we have shipped our first production unit. I think we have some design wins with it and I would call it a modest revenue contributor in 2016. We still see ARM strategically as an interesting market for the infrastructure markets. But it is certainly developing a bit slower than expected. So I think overall, I think it's an important proof point in terms of Enterprise class server Architectures with ARM. But it's a modest revenue contribution in 2016.

So we'll take our next question from Vivek Arya from Bank of America Merrill Lynch.

Lisa, just a follow-up on the last one on ARM servers. The comment about progress being somewhat slower, do you think that's an AMD-specific trend? Or does that apply to all the ARM server vendors?

Yes, I mean, I think it's more of a market statement, Vivek, than an AMD-specific statement. I think the overall commentary, maybe if I just expand a little bit is, look, the data center market is really, really interesting. And I think we all agree with that. I think x86 has a lot of momentum and that's one of the reasons that we've put quite a bit more emphasis on our x86 data center and infrastructure play. That being said, I think ARM does have a lot of specific areas where it can contribute and it has done so. But I would say in servers in particular, perhaps lower than originally expected, but it's still something to watch for the medium term.

Got it. And as my follow-up, perhaps a longer-term question, which is, what is the strategy to actually get to a meaningful earnings and cash flow growth? I understand on the macroenvironment is a little tough right now. But the way I see it, a lot of the progress you guys are making on your embedded products is being offset by the declines in your legacy businesses and as the mix is shifting to your embedded products, gross margins are sort of holding around that 30% level, but you're not really able to reduce costs. So sales are finding it tough to grow, right? But that offset, gross margins are not moving up that much. And you are now going to hold OpEx steady also. So I'm just trying to understand, what are we missing here that can help AMD be a more sustainably profitable company?

Sure, Vivek. So let me try and then Devinder can add, if he has some comments. So I think what you have to do is take a step back and look at overall the progress in year 2015 from a foundation standpoint and then what we hope to accomplish in '16 and forward. I think the most important message around sustainable profitability for AMD is around our product and technology roadmap and ensuring that we grow share in our target markets. So that is certainly the goal. I think if you look at some of the progress that we made in the second half of '15, we have seen a -- some stabilization in our Computing and Graphics business and actually, a return to some sequential growth. As we go forward into 2016, we certainly have to continue that momentum in both our client compute as well as our Graphics business in terms of gaining profitable unit market share. And then as we go forward, we have our data center strategy as well as our semi-custom and new markets that will bring additional opportunity. So from a product standpoint, it is about getting our technology out there. And I think we will enter 2016 with the strongest product portfolio we've had in a long time and we need to continue to work with our customers, design opportunities and moving the platforms into production as we go through the year 2016.

Yes. If I can add, Lisa, I think the other thing that I would add is, if you look at the couple of areas that Lisa mentioned, data center in particular, while also the embedded space as we talked about in our financial Analyst Day in May, those are businesses that command higher gross margins. So Vivek, to your point about the gross margins, I think in longer term, with that business kicking in, in 2017, we believe that we can get closer to the longer-term model. 2016, we've guided to operating -- I mean, free cash flow positive from an operation standpoint. And as we continue to manage the costs as you said, especially on the OpEx side of the house, improving the gross margin, in and of itself, obviously benefits the bottom line and that's kind of heading towards the longer-term model we outlined at the Analyst Day that we had in May of 2015.

Okay. One last quick clarification, what PC unit declines, Lisa, you're assuming for 2016?

Yes. So if you look at the current market projections it's somewhere in the low single digits. I think if you were to talk to the customer set, it might go from low single-digit to mid-single digit. So that's the environment that we are forecasting unit's share growth.

Our next question comes from Stacy Rasgon from Bernstein research.

First, I was wondering if you could elaborate a little more on how you plan to gain share on PCs for the year, especially since it looks like Zen isn't really launching until the tail end of the year, and it looks like you're starting Q1 already in a hole if I compare your guidance versus Intel?

Okay, Stacy. Why don't I start and again, Devinder can add. So overall, if you look at PCs, I think we'll have to wait until the numbers come out. But we believe we have gained a bit of share in Q4. I think if you look at the driving factors behind that, Stacy, there were a couple of factors. In 2015, I think we did a concerted effort to clean up some of our channel inventory both on the OEM side as well as in the DIY channel. So that factor will be gone in '15 relative to 2016. I think if you look at the product roadmap, I think the product roadmap is stronger. I think if you look at our commercial business, that is also stronger, so it's leading to a stronger product mix. So those are the key factors. Now relative to the Q1 guidance, I'll make a comment about Q1 guidance overall. Our Q1 guidance includes obviously, both the Computing and Graphics and the Enterprise embedded and semi-custom business. The semi-custom business is historically significantly lower in the first quarter of the year. If you look at the past couple of years, it's been the case because you're coming off of a strong holiday season. So I would say that, that has to be factored into that guidance. And then if you look at the Computing and Graphics business, I think what we're seeing is very consistent with what's out there in the market and we believe in that market, that sort of market conditions, we can gain share.

Yes, the only thing I would add, Stacy, is I think too early to tell from a viewpoint of your thinking in terms of the guidance for Q1, that just based on the guidance, we lose share in Q1 in the PC space.

So if I just look at you down 14% and Intel down what they are, there's the differential there?

Yes, I think the key is to look at the guidance that we gave and trying to parse out where the decline is. And it's kind of more weighted towards the EESC segment than the Computing and Graphics segment.

Got it, okay. For my follow up...

The other thing, just one last clarification. I think the thing to bear in mind, I think I said in my prepared remarks, in our quarter, in Q -- our quarter this year, actually both from a viewpoint on the quarter and the year-over-year, a 53-week year, and we have a 13-week quarter in Q1, as opposed to what the comparison you are doing, I think it's more on the 14 weeks as opposed to 13 weeks.

Well, I mean even if you correct for that, but okay. In terms of my follow-up, just very briefly, does your guidance for positive free cash flow for the year include the proceeds in the back end sale? And does your guidance for a 32% gross margin for next quarter contemplate you selling any of the inventory that you worked on in Q3?

So the first one is no, it does not. The free cash flow from operations have been positive for the year, it does not include the proceeds from the joint venture for the back end facilities. And then the guidance for the margin at 32% Q1 does not contemplate any sale of previously reserved inventory.

Got it. And that free cash flow guidance, that's not operating cash flow guidance, that's free cash flow guidance, it should be positive...

No, that's free cash flow. I think the way we define it is operating cash flow less CapEx.

Our next question comes from Matt Ramsay from Canaccord Genuity.

I think there's some -- my observation, looking at the product roadmap is there's some pretty big hurdles passed: getting Polaris on FinFET, getting Zen on FinFET over the next few quarters. I guess, relative to some lower operating spending that you guys are doing as a company, maybe Lisa you could lay out some priorities for how you're going to roll out these products. I guess particularly, I'm looking at how you balance semi-custom versus discrete GPU. How you balance Enterprise CPUs versus APUs when you roll out Zen. It seems like quite a bit to take on given the lower spending levels of the business at a whole, and I'm just wondering how you're prioritizing that versus the guidance for the year.

Sure. So Matt, I think maybe a couple of comments. I will say that I am pleased with the execution on engineering that we have accomplished over the last 12 months. I think we have passed some significant hurdles. The transition to FinFET for us was very, very critical across our businesses. And I feel good about the state of the progress there. As a result, as it reflects on 2016 spending, I think, Devinder commented earlier, but I would say, that's why we're giving ourselves a range in the OpEx from $320 million to $340 million. And we are being prudent in where we spend. However, clearly, there is a significant focus on discrete Graphics and what we can do in that space. I think we're very excited about the momentum around virtual reality and the momentum in gaming. And we think that, that's a very good market for us. I think relative to our CPU competitiveness and regaining competitiveness there, that is a very key priority as well. So Zen across both our clients computing as well as our server market is our priority. Relative -- the good thing about our semi-custom business is it does rely on customer investments to customize the roadmap. And so I think the combination of those things gives us a reasonable envelope to execute the go-to-market around the product portfolio.

And I guess, as my follow-up. I think I took away as an impression at least from CES, a refocusing of investment on developers, particularly in the GPU space. Lisa, maybe you could speak to that a little bit and how you guys are trying to, I guess, balance the priorities of the semi-custom business in consoles and gaming with sort of rekindling the brand and maybe rekindling mind share with developers in the PC gaming community?

Yes. I think the Radeon Technologies Group has added a lot of focus to our Graphics activities. And I think as you said, it's both a hardware and software statement. So the work we've done around our drivers and trying to ensure that we have a good customer experience as well as a good development experience is certainly there. I think the main takeaway is we know how to do this. It's really a matter of getting the focus and getting it done.

And our next question is from Srini Pajjuri from CLSA securities.

Lisa, just going back to your annual guidance for growth, if I start from down 14%, I think you have the model double-digit for the next 3 quarters, which is well above seasonal for years. So I'm trying to understand where the growth is coming from. Obviously, you said you expect to gain share, but can you talk about the semi-custom win that's supposed to ramp in the second half. How big that opportunity is and when exactly you expect those ramps to come in?

Yes, so Srini, let me try to frame it in this way. So if you look overall at our business, yes, we are projecting full-year revenue growth 2016 compared to 2015. And so we would have to have some significant growth as we go into the second half of the year. If you -- independent of any new design, the semi-custom business naturally is significantly higher in the second half than in the first half, especially third quarter. It's kind of a peak for the business as we go into the holiday season. And we continue to see that phenomena as our customers are giving us their forecasts. We expect the base semi-custom business or the base game consoles to continue unit growth in 2016 versus 2015. There will be some modest ASP decline with that, and then we expect to layer over it some new semi-custom revenue starting in the second half of the year. So from what we see obviously, a lot of things have to happen, but the semi-custom business is one that we've been able to predict pretty well given the customer long-term forecasts. And then we have to continue the conversation around the Computing and Graphics business as we see how the markets works itself out in the first half of the year going into the stronger second half for the PC business.

Okay. And then as a follow-up, I think Lisa, it was last quarter, you told us that you are looking to monetize some of the IP properties that you have. Can you give us an update as to, based on your discussions, how you see that opportunity short term and long term.

Yes. So on the IP monetization strategy, we will continue to update that quarterly as we go through the process. I think we have had a good -- really a good discussion around where to go there. I think there are several different avenues that we believe our IP will be valuable. I think on the straight patent side, we've said before, we have 10,000 patents that are over a substantive number of technical areas, including Graphics and microprocessors and other semiconductor patents. Those can certainly be licensed or in some cases there may be sales. However, another area that we think has a lot of potential is the area of technology licensing where we can help partners accomplish their objectives with both patents and know-how. So we will update the results on that as we go through 2016, but we do believe it's a significant area for us going forward.

We'll take our next question from Ross Seymore from Deutsche Bank.

Lisa, one for you and I guess, what you'd call now the base Enterprise embedded and semi-custom business. You've talked about the gaming SoC business being up on a unit basis, but in 2015, that whole segment was down about 8% year-over-year. So I guess my question is I know new things are coming in, in the back half of this year, but what gives you confidence that today's core business can actually remain anywhere close to flat considering that it fell in 2015?

Yes, Ross. So let me give you some more color on the compares which might help. So on the base EESC business, if you were to look at product revenues of semi-custom, game console SoCs, they were actually up a bit. So overall units were up double-digit percentage. ASP declined, but less than that and so product revenue was up. What you saw as segment decline was actually legacy revenue from server and embedded. And if you remember, we have some legacy revenue based on some of the older Opteron products that we continue to sell. And that has seen a drop off as well as our DCSS or SeaMicro business was there in 2014 that we exited in 2015. So that was the year-on-year decline that was there. And then I think as you go forward to 2016, I'm not being that specific about the base business. But I will say, I think units will be up and we'll have to see exactly how much up, and as the markets go. But we certainly don't see it substantially down, if that's what you're implying.

That's very helpful. And I guess, piggybacking off that to an earlier question this time for Devinder on the gross margin side. And correct me if I'm wrong here, but what I heard as to the answer to the earlier question as to why you're not guiding for the full year gross margin was partially because the unknown mix dynamic in revenues. To the extent that's true, does that imply that the gross margin delta between the Computing and Graphics group, and the EESC group, even with the new ramps in semi-custom is likely to remain as wide as it has in the last year or so?

I think we have to see how the year unfolds, to be honest. I think Q1, like I said in the guidance it's 32%. We need to see mix of product. We have new products been introduced in both the businesses with the new design wins in the second half on the semi-custom side. And then, obviously, on the CG side, you've heard us talk about Graphics and Computing new products kicking in. And so -- and from my standpoint, I want to see how it unfolds in terms of the mix of product, mix of the business before getting into the gross margin. But fair to say, as you know, the semi-custom business is the way the model works on an NRE standpoint has lower gross margin than the Computing and Graphics side of the business. So that's a fair statement.

And our next question is from Chris Rolland from FBR and company.

On semi-custom business, I'm sure you guys have looked at prior console platform price cuts for customers and their effect on sell through. So I'd love to know how your kind of thinking about that and the potential reacceleration if that were to happen. Do you have any prior metrics you can share with us? And then also, I think I know the answer, but if there was a platform price cut, should we still expect a slow and linear reduction in your ASPs or might there be something a little bit more aggressive like a onetime step down?

Yes. Okay, so Chris, the -- if you look at the semi-custom cycle and again, these cycles are hard to predict. Through this year, through the end of '15, the game console units are far ahead of the previous cycle. So on the order of 20 million units ahead of the previous cycle. When you look at the significant price points, I would say they are sub $300 price points that start accelerating demand, and you saw some of that this holiday season. So that had some impact. When you -- your question overall in terms of acceleration, I think again, the game console guys know how to do this cost reduction and they've done it very well. Our price or ASP reductions are not step function reductions. They end up being prenegotiated and in line with cost reductions that we have agreed to with our partners.

Okay, very helpful. Also, perhaps you can talk about ASPs in 2016, how you sort of see them trending with Summit Ridge and server products and how big a driver is that for top line and for profitability?

I think it is very important that we see an improvement in our product mix. And that's something that we've certainly been striving for in both our mobile products. And as we introduce higher performance desktop and server products, we should see that reflected in the ASPs. So the mix of business, focusing on commercial versus sort of the low end consumer will help all those things. But when Devinder talks about some of the pluses and minuses on gross margin, it really is our ability to increase and improve that mix in our overall business, going forward.

And our next question comes from Hans Mosesmann from Raymond James.

Lisa, a clarification on Zen. You said that you have some design wins already on the server side of that road map. Can you give us a sense on what kind of server wins? And what kind of an opportunity you see in terms of the market share over the next several years as you come back to the market?

Yes. So Hans, overall on the Zen design wins, we've been engaged very early on with large OEM and cloud providers on the Zen design point, and the platforms that would be useful for Zen. So we are -- we have, closed our first design wins. We are working very closely with these OEM partners to make sure that they bring up their platforms concurrently with our own design validation and testing. I think the main message is we are on track with the schedule that we previously discussed in terms of sampling this year. We will introduce first in desktop. And so we are having conversations with some of the PC OEMs about getting their platforms ready for desktop. And then we will go into Enterprise server first full year in 2017.

Okay. And then as a follow-up, what kind of performance point should we look at your initial Zens in the server space? Is this a Zeon E3 class type products or E5s? Or maybe you can help with some granularity there, if you can.

Yes, so we believe that we'll be able to address, let's call it, 80% of the server CPU market with our Zen class of products. So not the very high end, but really, the meat of the market.

Operator, we'll take 2 more questions please.

We'll take our next question from Joe Moore from Morgan Stanley.

I wonder if you could talk about the discrete GPU business, you were first-to-market with high bandwidth memory and saw the benefit of that. Did you see the benefit that you've hoped for and with your competitor ramping HBM at some point, presumably this year, does that blunt the momentum that you've seen in the GPU side?

Yes. I would say HBM was a very good technology. I think we got the performance benefit that we expected. It is still at the high-end of the cost point range. And so that's why we've introduced it just at the high-end. I think HBM and all this 2.5 D packaging technology is going to be really important over the next 3 years. So -- 3 to 5 years, but definitely over the next 3 years. So I think being first to market, we've gotten a lot of experience on the technology. We will continue to use high-bandwidth memory in our portfolio. And as the costs go down, it will give us an opportunity to use it in a broader set of segments.

And then as my follow-up, have you talked about potentially semi-custom products in virtual reality? And to the extent that you have or can, is that going to have the same type of GPU requirement that we've seen on the PC platform? Or is it possibly scaled down from that level of performance requirement?

So I think there are opportunities to do custom implementations of GPU for virtual reality. I think the amount of Graphics horsepower that's required and perhaps some of the form factors that you want to go into being smaller and more portable would enable you to do that. I think it's early to talk specifics, but I think the general idea that VR has a lot of requirements and doing something custom might be helpful, I think is absolutely on the mark.

We'll take our final question from Stephen Chin from UBS.

Lisa, if I could on the Graphics roadmap side, with the upcoming Polaris Architecture later this year, that's going to come about 4 to 5 quarters after PG was released, which is a pretty good improvement in terms of timing or cadence compared to the previous generation. So I guess, my question is, is this sort of 1-year plus cadence for your GPU roadmap? Is this something that can be stringed going forward? And how does that compare relative to the OpEx run rate that Devinder guided for, for this year? Is that the right quarterly run rate consisting that type of Graphics roadmap, first of all?

Yes. So I think the overall answer is we do believe the cadence of Graphics requires annual refreshes and we are going to invest to enable that. And I think the Polaris launch is significant because it's also a change in process technology, which sometimes can run into other issues. But I think we feel very good about where we are there and you should expect that cadence to continue.

Perfect. And as my follow-up, just given some of the prognosis on the professional commercial Graphics side and some of the design wins you're talking about with Dell, for example. I was wondering if you could help in providing any color from your customers in terms of qualitative or even quantitative potentially, in terms of the opportunity for AMD this year, especially given the macro backdrop. And is that going to be some large step function up this year from those design wins or it pulls the macro potential, and you have some of a modest headwind for that new opportunity?

Yes. So I really view the macro as more of a headwind for the overall PC market. When you talk about professional graphics, I think it's such a specialized market that it is more about the product you offer and is it competitive and differentiated enough. I think it's fair to say that most of our customers would say the products are actually very good. So the overall product capability and performance is good. Our issue has really been, are we investing enough in the software resources to help customers use some of our products. So I think on the Professional Graphics space, we do believe it's a growth opportunity. I think we're going to continue to invest in some of the software around Professional Graphics and continue to make steady progress into 2016.

That concludes our call for today. We would like to thank everyone for participating. Operator, you may close the call now.

Okay, ladies and gentlemen, this does conclude your conference. You may now disconnect, and have a great day.