Business

With help from game-chip shipments, AMD hits fourth-quarter earnings target

Above: Rory Read, CEO of AMD

Image Credit: Dean Takahashi

Advanced Micro Devices reported financial results that met earnings estimates and slightly beat Wall Street’s expectations for revenues for the fourth quarter ended Dec. 31.

But the maker of processors for computers, game consoles, and other devices said that its first quarter sales would be down 13 percent to 19 percent. Sunnyvale, Calif.-based AMD is a leading indicator for both PC sales and video game console sales as the second-largest maker of computer microprocessors.

The company said today that its non-GAAP earnings were 6 cents a share and revenues were $1.59 billion. Analysts had expected earnings of 6 cents a share on revenue of $1.54 billion. In the quarter, AMD shipped large volumes of chips for video game consoles that sold big numbers during the holidays: the Sony PlayStation 4 and the Microsoft Xbox One. Revenues were up 38 percent from a year ago.

“Strong execution of our strategic transformation plan drove significant revenue growth and improved profitability in the fourth quarter,” said Rory Read, AMD’s president and CEO, in a statement. “The continued ramp of our semi-custom [systems on a chip] and leadership graphics products resulted in a 38 percent revenue increase from the year ago quarter. Our focus in 2014 is to deliver revenue growth and profitability for the full year by leveraging our differentiated IP to drive success in our targeted new markets and core businesses.”

AMD shares fell 8 percent to $3.80 a share in after-hours trading. AMD had previously said it would have a weaker-than-expected fourth quarter when it reported its third-quarter earnings in October.

AMD has had a few tough years 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 Intel. But AMD has a lock on the video game console business, with its chips designed into the PlayStation 4 and Xbox One machines from Sony and Microsoft (and Nintendo’s Wii U as well). The two new consoles sold more than 7 million units during the holiday season.

Intel said last week that it expects flat revenues for 2014 and was cutting about 5,000 employees through attrition and early retirements.

AMD’s console monopoly could provide it with more steady revenues as it tries to compete against Intel in a variety of areas. AMD has also put a lot more focus into microservers and is creating chips based on the ARM low-power design architecture.

Still, AMD is dependent on PCs, which have struggled, as it gets about 80 percent of its revenue from the PC industry. Read joined the company in 2011. He was formerly the No. 2 executive at Lenovo, which has since taken on HP for the title of the world’s biggest maker of PCs.

Last week, AMD announced its code-named Kaveri processors, which are aimed at games and other high-performance applications. The Kaveri chip has 2.4 billion transistors, and 47 percent of them are aimed at producing high-end graphics. The chip is one in a series of accelerated processing units (APUs), which combine a central processing unit (CPU) and graphics processing unit (GPU) on the same chip.

The Kaveri chips, known as the A-Series APUs, will have four CPU cores, or brains, and eight GPU cores on one chip. The chips are also the first to use a new approach to computing dubbed the Heterogeneous System Architecture (HSA), which makes it easier to get around bottlenecks inside a PC and speed the whole system up.

For the year, AMD’s revenues were $5.3 billion, down 2 percent from a year ago. For the year, the company had a net loss of $83 million, or 11 cents a share.

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