This afternoon, AMD released their financial results for the third quarter, which ended September 27, 2014. While revenue was down slightly from Q2, the net income was positive for this first time this fiscal year. non-GAAP Earnings Per Share was $0.03, which missed analysts’ projections of $0.04. Earlier in the quarter projections were as high as $0.07 per share, but the Computing and Graphics segment was mixed this quarter due to “challenging market conditions” according to AMD.

Starting July 1st, 2014, AMD reorganized their reporting structure into two groups. The Computing and Graphics group focuses on desktop and notebook processors, chipsets, discrete desktop GPUs, and workstation GPUs. The Enterprise, Embedded, and Semi-Custom group includes server processors, embedded processors, dense servers, semi-custom SoCs, engineering services, and royalties, which is pretty much every market AMD is in other than the traditional desktop/notebook market.

AMD Q3 2014 Financial Results (GAAP)
  Q3'2014 Q2'2014 Q3'2013
Revenue (Billions) $1.43 $1.44 $1.46
Operating Income (Millions) $63 $63 $95
Net Income (Millions) $17 -$36 $48
Earnings Per Share $0.02 -$0.05 $0.06

Revenue for Q3 2014 was $1.43 billion, down just under 1% from Q2 2014’s $1.44 billion. As compared to Q3 2013, revenue was down 2%. Operating Income was $63 million (non-GAAP $66M) for the quarter, which is also down from the previous quarter and year-over-year. Net income was $17 million (non-GAAP $20M) for the quarter which is up from the $36 million loss last quarter, but down from $48 million profit in Q3 2013. Gross margin was flat from last quarter at 35%.

AMD Q3 2014 Financial Results (Non-GAAP)
  Q3'2014 Q2'2014 Q3'2013
Revenue (Billions) $1.43 $1.44 $1.46
Operating Income (Millions) $66 $67 $78
Net Income (Millions) $20 $17 $31
Earnings Per Share $0.03 $0.02 $0.04

The Computing and Graphics segment revenue decreased 6% from last quarter and 16% year-over-year. AMD states the primary decrease is due to by lower chipset and GPU sales as compared to last quarter, and decreased notebook processor and chipset sales as compared to a year ago. The Operating Loss for the division was $17 million, which is up (or down, depending on how you look at negative numbers) substantially from the $6 million loss last quarter and $9 million loss in Q3 of last year.  The Average Selling Price (ASP) of CPUs/APUs actually increase sequentially and year-over-year. Discrete GPU ASP decreased over last quarter, but increased over the same period last year. The Computing and Graphics segment is a tough market for AMD right now. Intel is moving to 14 nm while AMD has to rely on Global Foundries and other fabs to attempt to catch up. This hampers their ability to match Intel on the performance per watt metric certainly. On the GPU front, NVIDIA just released the Maxwell based GTX 980 and 970, as well as the mobile counterparts which have shown impressive performance, and efficiency. Hopefully AMD can counter with some new products in the near term.

The Enterprise, Embedded, and Semi-Custom division fared much better for Q3, with a 6% sequential gain in revenue and 21% year-over-year. Operating income for the quarter was $108 million which was up from the $97 million of Q2, and $92 million of Q3 2013. As with the last couple of quarters, AMD attributes the gains primarily due to increased sales of semi-custom SoCs. Their embedded revenue grew by “double digits” as compared to last quarter. Clearly AMD has found a niche here where they can use their expertise in new markets to shore up the company, and so far, it has been successful. In addition, AMD has closed two new Semi-Custom SoC designs this quarter which should help this division continue its growth.

Results Per Division
  Q3'2014 Q2'2014 Q3'2013
Computing and Graphics Revenue (Millions) $781 $828 $925
Computing and Graphics Operating Income (Millions) -$17 -$6 $9
Enterprise, Embedded, and Semi-Custom Revenue (Millions) $648 $613 $536
Enterprise, Embedded, and Semi-Custom Operating Income (Millions) $108 $97 $92

In addition, AMD is also trying to cut costs by reducing their workforce by about 7% Currently, they have 10,149 employees as of the end of Q3, which means around 710 people will be cut from the company. Most of these cuts should be done by the end of Q4. AMD will then adjust their real estate footprint to accommodate the smaller workforce, which could mean additional infusions of cash from the sale of buildings. They are hoping to have savings of $9 million for Q4 and $85 million for FY 2015.

Their forecast for Q4 is not rosy either. AMD is expecting revenue to decrease 13% from Q3, plus or minus 3%. However they are also hoping to drop expenses from the current guidance of $420 to $450 million, to $385 million, which means they are hoping for a positive non-GAAP free cash flow.

Although AMD did miss investor earnings, they did not miss by much and the net result was a quarter where the company managed to turn a tiny profit, which is in stark contrast to the first couple of quarters for 2014. Unfortunately, AMD’s losses all stem from the desktop PC industry. Intel just had a record quarter, so there is certainly money to be made in this sector. We will have to see how Dr. Su, the new CEO of AMD, addresses this for the next quarter.

 

Source: AMD Investor Relations

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  • Flunk - Friday, October 17, 2014 - link

    Samsung owns their own fabs so it's not a good example. Reply
  • melgross - Friday, October 17, 2014 - link

    What? AMD has no market power, along with no money. Apple bought 30 million x86 chips last year, and 250 million ARM chips of their own design. How can AMD compare to that? Reply
  • testbug00 - Friday, October 17, 2014 - link

    paying off debt... I believe AMD is trying to put as much money as possible into paying off debt before profits, or, sometimes when it puts them into losses/worse losses.

    AMD isn't "stuck" lower process nodes still aren't ready for parts that aren't super-high yield or super-high-margin iirc.
    Reply
  • HighTech4US - Friday, October 17, 2014 - link

    Quote: paying off debt... I believe AMD is trying to put as much money as possible into paying off debt before profits

    AMD has not been paying off debt. In fact they expanded their long term debt with their last refinancing.

    All AMD is doing is pushing out when the major portion of the debt becomes due with the hope that somehow they can right the ship.

    AMD has done reverse mortgages on their properties in order to get cash to run day by day operations.

    Now along with the 7% employee cuts AMD will be selling some property for cash.

    None of the above is good and usually if this was done by an individual it is a sign that BK is coming sometime in the future.
    Reply
  • melgross - Friday, October 17, 2014 - link

    So, you're saying that 22nm isn't ready? Aren't you a bit behind the times? And 20nm is obviously ready.

    AMD's technology was always poor. I remember going back decades, that it was poor. They often announced chips that were leading edge, but couldn't produce them until Intel surpassed them, and AMD had to sell them at a discount when they first appeared, later on.
    Reply
  • Alexvrb - Friday, October 17, 2014 - link

    Cost/yield is part of the reason they didn't jump on these new processes right away. The other is that you have to design/redesign to target a new process, so when you're building a chip you have to choose whether to gamble on a new process. Sometimes you gamble and you lose, the process isn't ready for primetime and you suffer.

    It's also easier to start working with smaller geometries when you're dealing with tiny SoCs. The process will have to mature a bit before AMD adapts its much larger chips. That being said they should bring their smaller cat-core SoCs over to smaller processes ASAP.
    Reply
  • testbug00 - Friday, October 17, 2014 - link

    you don't need to be competitive in the high end to make money. Brazos is what kept AMD's lights on with Bulldozer and everything else going on. Would Bulldozer having matched/exceeded the hype have been better than Brazos was? Maybe, but, maybe not.

    AMD's almost anytime you see an x86 AMD semi-custom or embedded win from AMD, that is only possible because of their CPU division being the only game in town besides Intel with an x86 licence (well, there is Via...)
    Reply
  • HighTech4US - Friday, October 17, 2014 - link

    The low end market that AMD played in is going away as Intel decided to attack it with the low cost Atoms.

    Next year when RockChip gets to go full out with the Atom expect AMD's former playground to be under full attack.

    AMD losses in the CPU division will accelerate.
    Reply
  • testbug00 - Friday, October 17, 2014 - link

    I did not realize Intel was selling atom's in the embedded and semi-custom markets?

    Markets where you often need a specific piece of specifications, if the GPU is not up to snuff in an atom, it will never be bought there. If AMD can be modified for a lower cost to add something the company needs, it will be done.

    Not sure why you think Atom is targeting Embedded and semi-custom, which is where AMD will likely end up making its money on x86.

    Atom is also to slow to target the lower end APU market. The other place wordwide where AMD is likely to make quite a bit.

    Given I believe AMD is one of the movers in ARM server chips that has the most experience in servers and working alongside companies that make them, I would give them pretty good chances to take a large chunk of that profitable market. Atom won't do anything there. Core architecture won't do anything their either.
    Reply
  • Flunk - Friday, October 17, 2014 - link

    Actually Intel is now offering embedded and semi-custom chips. They're even offering their Atom core as IP to integrate with other designs. Reply

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