AMD Reports 2014 Second Quarter Results

[Cristian_25H]

AMD today announced revenue for the second quarter of 2014 of $1.44 billion, operating income of $63 million and net loss of $36 million, or $0.05 per share. Non-GAAP operating income was $67 million and non-GAAP net income, which primarily excludes $49 million of loss from debt redemption in the quarter, was $17 million, or $0.02 per share.

"The second quarter capped off a solid first half of the year for AMD with strong revenue growth and improved financial performance," said Rory Read, AMD president and CEO. "Our transformation strategy is on track and we expect to deliver full year non-GAAP profitability and year-over-year revenue growth. We continue to strengthen our business model and shape AMD into a more agile company offering differentiated solutions for a diverse set of markets."





Quarterly Financial Summary

• Gross margin was 35 percent in Q2 2014.
  Gross margin was flat sequentially.
• Cash, cash equivalents and marketable securities were $948 million at the end of the quarter, significantly higher than the target minimum of $600 million and close to the optimal zone of $1 billion.
• Total debt at the end of the quarter was $2.21 billion, an increase from $2.14 billion at the end of Q1 2014.
  During Q2 2014, the company continued re-profiling its near-term debt maturities, issuing $500 million in aggregate principal amount of 7.00% Senior Notes due 2024 and repurchasing all $452 million aggregate principal amount of the company's outstanding 8.125% Senior Notes due 2017.
• Computing Solutions segment revenue increased 1 percent sequentially and decreased 20 percent year-over-year. The year-over-year decline was due to decreased microprocessor unit shipments.
  Operating income was $9 million, an improvement from an operating loss of $3 million in Q1 2014 and operating income of $2 million in Q2 2013. The sequential increase was primarily driven by improved gross margin due to a richer mix of notebook products while the year-over-year increase was primarily driven by lower operating expenses.
  Microprocessor average selling price (ASP) increased sequentially and year-over-year.
• Graphics and Visual Solutions segment revenue increased 5 percent sequentially and 141 percent year-over-year driven largely by increased semi-custom SoC shipments. Graphics processor unit (GPU) revenue decreased sequentially and year-over-year, primarily due to a decrease in AIB channel sales, partially offset by increased sales of professional graphics and desktop OEM GPUs.
  Operating income was $82 million compared with $91 million in Q1 2014 and breakeven in Q2 2013. The sequential decline was primarily due to lower GPU revenue, while the year-over-year increase was driven by increased sales of semi-custom SoCs.
  GPU ASP decreased sequentially and year-over-year, primarily driven by lower AIB channel sales.

Recent Highlights

• AMD unveiled further details on its ambidextrous computing roadmap, including a 64-bit ARM architecture license and plans to develop custom high-performance ARM and x86 processor cores for 2016. The company's differentiated x86 and ARM strategy is designed to deliver unmatched computing and graphics performance using a shared, flexible infrastructure to drive new innovations.
• AMD appointed Dr. Lisa Su to Chief Operating Officer, responsible for overseeing the company's previously separate global operations, operating segments and sales organization to drive growth in both traditional PC and adjacent markets.
• AMD realigned its organization structure to deliver unmatched customer value in both traditional PC markets and adjacent high-growth markets. Effective July 1, 2014, AMD's two new reportable segments are as follows:
  Computing and Graphics segment, which will primarily include desktop and notebook processors and chipsets, discrete GPUs and professional graphics;
  Enterprise, Embedded and Semi-Custom segment, which will primarily include server and embedded processors, dense servers, semi-custom SoC products, development services and technology for game consoles.
  AMD's Quarterly Report on Form 10-Q for the quarter ended September 27, 2014 will reflect this new segment reporting structure.
• AMD detailed its plans to accelerate the energy efficiency of its accelerated processing units (APUs) delivering 25x efficiency improvements by 2020 through design optimizations, intelligent power management and Heterogeneous System Architecture advances that are expected to enable AMD to outpace the industry's historical energy efficiency trend by at least 70 percent.
• AMD continued to gain momentum with its embedded products in the second quarter.
  The company introduced the 2nd-generation embedded R-Series APU as well as the AMD embedded G-Series SoC and CPU solutions, which will power HP thin clients and Advantech's new embedded industrial solution and are ideally suited for ATMs, kiosks and medical equipment applications.
  AMD embedded Radeon graphics were selected by Boeing for its next-generation advanced cockpit display systems.
• AMD publicly demonstrated for the first time its 64-bit ARM-based AMD Opteron A-Series processor, codenamed "Seattle," a significant step forward in expanding the footprint of ultra-efficient 64-bit ARM solutions for cloud computing and the Internet of Things.
• AMD expanded its mobile APU offerings in the quarter:
  Acer, Dell, HP and Lenovo have all introduced notebooks powered by AMD's newest 3rd-generation mainstream mobile APUs, which combine category-leading compute performance with unique features and rich user interactions.
  AMD also launched its most advanced mobile APUs for consumer and commercial notebooks. The new 2014 performance mobile APUs include AMD's first FX-branded enthusiast class APU for notebooks as well as AMD Pro A-Series APUs. HP is offering the AMD PRO A-Series APUs across its Elite 700-Series notebooks, desktops and all-in-ones, with additional OEMs expected to introduce systems later this year.
• AMD expanded its 2nd-generation Graphics Core Next-based professional graphics solutions with the introduction of the AMD FirePro W8100 professional graphics card, which delivers 38x more performance than the closest competitive offerings based on double precision testing. Dell, HP and more than 10 workstation system integrators have all announced systems featuring the new card.
• AMD's groundbreaking Mantle API, which creates more immersive experiences that take fuller advantage of modern APUs and GPUs to deliver console-like experiences, will be used by Electronic Arts in the upcoming Battlefield Hardline, Dragon Age: Inquisition and Plants vs. Zombies: Garden Warfare games. More than 40 game titles supporting Mantle are in development with more than 50 developers actively working with the API for future titles.

Current Outlook
For the third quarter of 2014, AMD expects revenue to increase 2 percent, plus or minus 3 percent, sequentially.

View at TechPowerUp Main Site

 

[natr0n]

With the amount of gpu they sell this doesn't seem right.


only 1.44 billion...
Someone is pocketing money.

 

[MakeDeluxe]

With the amount of gpu they sell this doesn't seem right.

only 1.44 billion...
Someone is pocketing money.

That or they sold them with only a small profit

 

[Xzibit]

Conference Call is in 1hr 30mins. Q&A portion are always fun to listen too.

 

[brian111]

I thought they would be doing better than this by now. Granted, it's leveled off from the precarious position from not long ago but it's still not that great.

 

[john_]

After Intel's results, this is disappointed at best.

 

[erocker]

Earnings are flat. No surprise. If you look at the past year, there's been nothing that jumps out at anyone eluding to an increase or decrease.

 

[Dent1]

With the amount of gpu they sell this doesn't seem right.


only 1.44 billion...
Someone is pocketing money.

When company's expand its not efficient to declare big profits.

More than likely its for tax reasons, build more infrastructure and expand. Then sell your product at lower margins so you artificially create a loss or a break even on paper.

Also, the previous years AMD made huge losses which are deducted from their profit in the fore-coming years. So the total will be smaller artificially on paper.

 

[Xzibit]

Aside from the dump the stock is taking. Some interesting tid bits from the conference call.

• New tech next gen coming late 2016 (CPU/APU/GPU on 20nm) Probably talking about K12 and GCN 3.0
• Currently using 50% of GlobalFoundry wafers
• Seattle to enter production in Q4

They are blaming the Q slow down on the crypto currency dry up and flood of second hand sales of those CPU/GPU into the market.

 

[HumanSmoke]

When company's expand its not efficient to declare big profits.

Is AMD expanding?
If anything it seems to be contracting. In recent times it has divested itself of its foundry business, it's mobile, baseband, and set top business to Qualcomm and Broadcom, sold its property assets, and just recently made the decision to axe a substantial part of its datacenter infrastructure. It might be expanding into the fast-turnabout ASIC trade, but it is certainly contracting from high margin markets and asset base.

More than likely its for tax reasons, build more infrastructure and expand. Then sell your product at lower margins so you artificially create a loss or a break even on paper.

A bit of a double edged sword then. Tax breaks aren't guaranteed in perpetuity, and manipulating the P&L to reflect null growth isn't a great incentive to investors. Any idea what the money houses think of this?

 

[Sony Xperia S]

Aside from the dump the stock is taking. Some interesting tid bits from the conference call.

• New tech next gen coming late 2016 (CPU/APU/GPU on 20nm) Probably talking about K12 and GCN 3.0
• Currently using 50% of GlobalFoundry wafers
• Seattle to enter production in Q4

They are blaming the Q slow down on the crypto currency dry up and flood of second hand sales of those CPU/GPU into the market.

• New tech next gen coming late 2016 (CPU/APU/GPU on 20nm) Probably talking about K12 and GCN 3.0

WOW!

What about 16 nm? I thought they shoould have developed something by then.

Very long time (at least two more years) until the moment when I will upgrade my PC with new AMD processors and next-gen GPU.

 

[Sony Xperia S]

AMD, why don't they use Intel's 14 nm production capacity when Intel themselves have problems to fully utilise it and their factories remain idle?

 

[revanchrist]

• New tech next gen coming late 2016 (CPU/APU/GPU on 20nm) Probably talking about K12 and GCN 3.0

WOW!

What about 16 nm? I thought they shoould have developed something by then.

Very long time (at least two more years) until the moment when I will upgrade my PC with new AMD processors and next-gen GPU.

GCN 3 arrives early 2015 if the Carizzo slide leaked earlier in VR-Zone is to be trusted.

AMD, why don't they use Intel's 14 nm production capacity when Intel themselves have problems to fully utilise it and their factories remain idle?

Intel delayed Broadwell again and again and again due to production issue. Period.

 

[Champ]

So no new gpu/cpu until the last quarter of 2016 most likely. That's good if you just brought amd/radeon gear. This stuff should stay relevant and be running to its peak potential by then

 

[Xzibit]

So no new gpu/cpu until the last quarter of 2016 most likely. That's good if you just brought amd/radeon gear. This stuff should stay relevant and be running to its peak potential by then

Next generation, not no new. Only thing official in 2016 is K12 so far.

I believe they were referring to this^. Since he did name the check list but also said CPU & GPU and mentioned they will be 20nm.

Maybe someone will post the Q&A transcript of the conference call somewhere.

 

[ShockG]

GCN 3 arrives early 2015 if the Carizzo slide leaked earlier in VR-Zone is to be trusted.




Intel delayed Broadwell again and again and again due to production issue. Period.

Don't say this because it's not true.
All vendors are working on Skylake platforms right now, past Broadwell. Broadwell was not delayed, or any such thing. The desktop drop in chips (socket) for Z97 and the Z107 chipset were pushed forward to Computex 2015, but the mobile and embedded Broadwell parts were brought in closer than originally planned. It was INTEL's partners who wanted Broadwell delayed so they could clear Z87 and Z97 products. Z97 as well was released ahead of schedule.

There is no production issue here, do not write that as it is just plain untrue.

 

[revanchrist]

Don't say this because it's not true.
All vendors are working on Skylake platforms right now, past Broadwell. Broadwell was not delayed, or any such thing. The desktop drop in chips (socket) for Z97 and the Z107 chipset were pushed forward to Computex 2015, but the mobile and embedded Broadwell parts were brought in closer than originally planned. It was INTEL's partners who wanted Broadwell delayed so they could clear Z87 and Z97 products. Z97 as well was released ahead of schedule.

There is no production issue here, do not write that as it is just plain untrue.

Broadwell is supposed to launch in mid-2014 to replace Haswell. Instead, it get delayed and Haswell-Refresh takes it's place. In the end, desktop Broadwell get delayed so much that it will coincide with mid-2015 Skylake launch schedule (quote from multiple sources such as VR-Zone and wccftech etc etc). Mobile Broadwell get postpone into 2014 Back to School season as quoted from Intel earlier. But latest leak shows mobile Broadwell will instead be postponed to December 2014 holiday season. Braswell chip (14nm successor to mobile Bay Trail Atom) which is supposed to be launch by end of 2014 will not see daylight until early 2015. SO do tell me, which part of these is not true, huh?

 

[Dent1]

Is AMD expanding?
If anything it seems to be contracting. In recent times it has divested itself of its foundry business, it's mobile, baseband, and set top business to Qualcomm and Broadcom, sold its property assets, and just recently made the decision to axe a substantial part of its datacenter infrastructure. It might be expanding into the fast-turnabout ASIC trade, but it is certainly contracting from high margin markets and asset base.


A bit of a double edged sword then. Tax breaks aren't guaranteed in perpetuity, and manipulating the P&L to reflect null growth isn't a great incentive to investors. Any idea what the money houses think of this?

Key share holders are looking the a multitude of small pieces to decipher the bigger picture. They already have a projection (accurate or inaccurate) of projected gross revenue, and net profits for up to decade forecast.

Don't confuse taxable profit with growth. Although taxable profit is a single measure of growth, growth isn't solely taxable profit. For example, if AMD managed to secure an exclusive contract selling processors for Apple iPhone. Their market share would grow significantly in the handheld market, even if they declared a loss financially. The media attention would be huge online and in publications, confidence would be initially so strong there would be a spike increase in AMD share price, thus generating them huge profit just from inking the deal alone. A small decimal share price increase could be more profitable and demonstrate more growth than actually selling the processors.

I don't think money houses care, as long as the interest and capitol on the loan is paid within schedule. They trust AMD knows more about generating profit in their sector than them.

With the datacenter, there is no good reason to have 18 datacenters scattered around the world. They will have 1 huge datacenter in Atlanta with the same capabilities. Thus creating efficiency i.e. Having staff in one location, not having to hire bilingual staff, language issues, logistic issues from transporting hardware etc. This is actually a very good thing long term. The money saved can go back into the business to expand further.

 

[HumanSmoke]

Don't confuse taxable profit with growth.

Don't confuse what I'm saying with whatever point you're trying to make to paint a rosy picture.
You talk about AMD being an expanding business, when even AMD themselves are talking about trimming the company into a leaner business.
By what definition does this qualify as an expanding company?

Expanding companies also don't see revenue fall by a quarter of a billion dollars in less than three years ($US1.691bn in Q3 2011), don't axe infrastructure, generally don't axe their workforce, or sell off their IP for peanuts.

BTW: AMD providing the processor for the iPhone? Yeah, I think Rory has his R&D rainbow-hued unicorn working on that as we speak.

 

[Dent1]

Don't confuse what I'm saying with whatever point you're trying to make to paint a rosy picture.
You talk about AMD being an expanding business, when even AMD themselves are talking about trimming the company into a leaner business.
By what definition does this qualify as an expanding company?

Expanding companies also don't see revenue fall by a quarter of a billion dollars in less than three y
ears ($US1.691bn in Q3 2011), don't axe infrastructure, generally don't axe their workforce, or sell off their IP for peanuts.

I'm not trying to paint a rosy picture, trying to illustrate that growth can be measured in many ways.

All companies trim their business to make it efficient.

If there is a way to do more with less overheads wouldn't you?

Microsoft is about to fire 18,000 employees. Could Microsoft afford to keep them. Yes, but its inefficient to have ex Nokia employees on payroll for no good reason. The cash flow can be redirected elsewhere.


That chart doesn't tell us enough, it doesn't explain any of the business decisions which could have lead to those figures, or explain the internal or external economical influences that caused those figures. This is why looking at revenue or assets isn't enough to measure growth.

 

[HumanSmoke]

I'm not trying to paint a rosy picture, trying to illustrate that growth can be measured in many ways.

And in what way could AMD be shown to be an expanding business? And, please no comparison of a singular range/product that previously did not exist to show some ridiculous growth from a zero point.

All companies trim their business to make it efficient.

Well, yes they do....but efficient does not equal expanding

Microsoft is about to fire 18,000 employees. Could Microsoft afford to keep them. Yes, but its inefficient to have ex Nokia employees on payroll for no good reason. The cash flow can be redirected elsewhere.

Not really the same thing. Microsoft spent $7.2+billion to get to that stage. They expanded their IP, They expanded their product base, They expanded their software reach. They expanded their brand. Which of these criteria did AMD meet when it axed its workforce ? How did AMD EXPAND as a company by selling off its assets if the money it accrues from asset sales goes into debt servicing from overpaying $2.7 billion for a previous acquisition ?
MS gobbling up Nokia has no bearing on AMD's situation. Acquisitions usually mean redundancies or moving of staff unless the newly acquired company is to be operated as a wholly independent division - but even at its most basic, you wouldn't expect the acquired company to keep its board of directors and any positions already extant in the parent company.

That chart doesn't tell us enough, it doesn't explain any of the business decisions which could have lead to those figures, or explain the internal or external economical influences that caused those figures. This is why looking at revenue or assets isn't enough to measure growth.

Well, company growth is measured by Assets (and asset vs debt), revenue, debt-to-asset and debt-to-equity ratios, market share+ ASPs, capitalization ratio, judicious financing, and increased investment.
What you seem to be saying is none of that matters, and AMD's position as an expanding company (aside from their own managements proclamation that the company is downsizing) should be taken as an article of faith. Because of what? Potential ? A complicated, unlikely, and highly subjective combinations of "Ifs"?

With the datacenter, there is no good reason to have 18 datacenters scattered around the world. They will have 1 huge datacenter in Atlanta with the same capabilities.

Well, no it won't have the same capabilities. The article clearly states that on a pure hardware basis it's a four-to-one nodal increase, but 18 down to 2 does not equal that. There is also the issues of job queues and workload sharing - although I have no idea how fully utilised the present datacenters are (and nor would anyone else outside AMD I'm guessing), so I wouldn't hazard a guess about overall efficiency, or time-sensitive workloads.

 

[Dent1]

And in what way could AMD be shown to be an expanding business? And, please no comparison of a singular range/product that previously did not exist to show some ridiculous growth from a zero point.

For one AMD has expanded it's APU Portfolio. Their APU range have "existed for years". Yet their range continues to grow.

Well, no it won't have the same capabilities. The article clearly states that on a pure hardware basis it's a four-to-one nodal increase, but 18 down to 2 does not equal that. There is also the issues of job queues and workload sharing - although I have no idea how fully utilised the present datacenters are (and nor would anyone else outside AMD I'm guessing), so I wouldn't hazard a guess about overall efficiency, or time-sensitive workloads.

The article says moving the datacenter to Atlanta will qualify them for a huge government tax break. It mentions the power consumption being cheaper in Atlanta, if that isn't working more efficiently what is?

With any hardware upgrade or migration there is advantages and disadvantages. I guess job sharing and work queues is on the surface is a disadvantage, but perhaps the money saved, cash flow generated far outweighs that in the long term?

Well, company growth is measured by Assets (and asset vs debt), revenue, debt-to-asset and debt-to-equity ratios, market share+ ASPs, capitalization ratio, judicious financing, and increased investment..

It's also based on current perceived value as well as an future estimated value, this is one of many external factor you're not considering.

Also, for all we know, the physical building and land plot of those 18 datacenters could have depreciated year on year, AMD could align the depreciation value against profits, but perhaps they did that for a while and are cutting their losses. Who knows? Neither of us was in the meeting.

 

[HumanSmoke]

The article says moving the datacenter to Atlanta will qualify them for a huge government tax break.

1. Everything that is business related in Georgia seems to get tax credits. The electricity subsidy ( currently at 2 megawatt/hour) Atlanta doles comes at the expense of residential electricity subscribers. Hopefully spending your way out of an economic slump works for the state...it had better.
2. And this is the important one...AMD HAD to consolidate their datacenters - their main one was housed at the Austin Campus they just sold.

It mentions the power consumption being cheaper in Atlanta, if that isn't working more efficiently what is?

Yup. Georgia residents are picking up half of AMD's electricity bill....but you still seem to be pounding that efficiency hobbyhorse. No one is debating that AMD aren't getting more efficient. The argument is whether AMD are an expanding company as you attest. Apart from adding to their APU lineup (big deal, they also EOL the previous models) you really haven't made a case that they are. Full disclosure - I used to be part of a team that put together a weekly financial result for a ten-figure yearly revenue company. I'm well aware how to interpret a companies books, and estimate goodwill.

 

[Xzibit]

Full disclosure - I used to be part of a team that put together a weekly financial result for a ten-figure yearly revenue company. I'm well aware how to interpret a companies books, and estimate goodwill.

Didn't you recently mention your a chef.

Thanks. I'm a chef who learned his trade in some pretty brutal kitchens - the logo is very apt.

Just out of curiosity how does a New Zealand chef become a self proclaim expert on USA state to state tax incentive law ?

I'd like to take that course. How many hours is it and where can I find it online ?

 

[HumanSmoke]

Didn't you recently mention your a chef.

Yes I am. I previously worked in the meat processing (industrial slaughterhouses and international shipping line) and for the Ministry of Justice at various times in my working life - amongst other vocations such as writing features for tech sites. Do people where you come from stay in the same career from the day they leave school to the day they retire ? Or are they like you and class trolling tech forums as an occupation?

Just out of curiosity how does a New Zealand chef become a self proclaim expert on USA state to state tax incentive law ?

Who needs to be an expert? - and I certainly didn't claim any such thing, so I guess you're just trolling - quelle surprise! The details of Georgia's state legislation is open to anyone who can parse the information. Georgia's state tax incentive/credit legislation isn't particularly different from any other economically depressed area that is looking to attract investment.

I'd like to take that course. How many hours is it and where can I find it online ?

The fact that you can't even find the short form overview of the state's tax incentive legislation - let alone the full statute pdf leads me to believe this is way, way, way above your acumen level so don't get your hopes up. The fact that you don't even know the difference between owning shares and being owned should be more than a subtle hint that you need to start somewhere around the pre-high school economics level. Look on the bright side, at least you got corrected on your lack of financial understanding by someone with a backround in finance rather than someone who just cooks