Business

AMD beats slightly diminished expectations for fourth-quarter chip sales

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Advanced Micro Devices reported financial results that slightly beat Wall Street’s expectations for the fourth quarter ended Dec. 29.

Revenues came in at $1.16 billion, down 32 percent from a year ago and a hair above expectations. And the chip maker’s net loss per share was 14 cents, better than expected but down significantly from 33 cents a share a year ago.

Sunnyvale, Calif.-based AMD, the No. 2 maker of PC microprocessors, had a tough year as it trailed Intel in competitiveness and saw a slowdown in demand as consumers began to favor tablets and smartphones over PCs. Since it wasn’t well positioned for that transition, the slowdown hit AMD harder than others.

Analysts expected a loss of 20 cents a share on revenue of $1.15 billion for the fourth fiscal quarter ended Dec. 29.

In the previous third quarter, AMD saw a 10 percent sequential drop in revenues and loss of $157 million. After that report, AMD restructured and cut 15 percent of its staff. Over time, AMD now plans to focus 40 percent to 50 percent of its efforts in markets that are adjacent to the PC, such as low-power ARM-based microservers. AMD had said earlier it was targeting break-even results on $1.3 billion in revenue in the third quarter of 2013.

Reuters reported earlier today that AMD had hired two senior engineers who hailed from Qualcomm and Apple, as an effort to focus on low-power chips. The story said that Charles Matar, formerly of Qualcomm, joined AMD as vice president of system-on-chip development. And Wayne Meretsky, who worked at Apple in the 1990s, was also named vice president of software intellectual property development.  AMD confirmed the hires are part of its effort to move into new markets.

AMD gets about 80 percent of its revenue from the PC industry. Rory Read (pictured above), the chief executive of AMD, joined the company in 2011. He was formerly the No. 2 executive at Lenovo, which has since been battling HP for the title of the world’s biggest PC maker.

Read said in a statement that AMD “continues to evolve our operating model and diversify our product portfolio with the changing PC environment.” He added, “The investments we are making in technology today are focused on leveraging our distinctive IP to drive growth in ultra low power client devices, semi-custom SoCs and dense servers.  We expect to deliver differentiated and groundbreaking APUs (combo chips with graphics and processors on the same chip) to our customers in 2013 and remain focused on transforming our operating model to the business realities of today.”

In the fourth quarter of 2012, gross margin percentage was 15 percent. Non-GAAP gross margin was 39 percent, up 8 percent from the prior quarter. The company said the gross margin was positively impacted by the sales of higher-priced desktop microprocessors.

For the full year, AMD reported 2012 revenue of $5.42 billion, an operating loss of $1.06 billion, and a net loss of $1.18 billion, or $1.60 a share. That compares with revenue of $6.57 billion, operating income of $368 million, and net income of $491 million, or 66 cents a share. AMD closed the quarter with $1.2 billion. AMD took a restructuring charge of $90 million in the quarter, including costs to layoffs that are taking place in the first quarter.

Revenue in the computing solutions segment were down 11 percent from the prior quarter and up 37 percent from a year ago. Microprocessor unit volume shipments were down from the prior quarter and a year ago. The operating loss was $323 million, due largely to the impact of a “lower of cost or market” charge related to AMD’s manufacturer, Globalfoundries. Average microprocessor prices were up sequentially, but down from a year ago.

Graphics segment revenue was down 5 percent sequentially and down 15 percent from a year ago. That was due to lower unit shipments. Operating income was $22 million, compared with $27 million a year ago. Average graphics chip prices were flat sequentially and up from a year ago. During the quarter, Nintendo launched its Wii U game console with AMD Radeon HD graphics chips.

In its outlook, AMD said it expects revenue to decline 9 percent, plus or minus 3 percent, sequentially in the first quarter of 2013.

“It was a challenging 2012 for AMD resulting in significant financial losses but they made some big bets to better position themselves in the future,” said Patrick Moorhead, analyst at Moor Insights & Strategy. “These bets included the acquisition of SeaMicro for dense servers, announcement of a 64-bit ARM server SOC, and investments into “Temash,” a distinct X86 SOC targeted at fanless tablets.  While AMD is positioning themselves for markets outside of the PC space for the longer-term, a PC market turnaround would really help them right now as it’s the lion’s share of their business and will be in 2013.”


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