AMD’s often perilous financial situation usually bears watching, but this past quarter is of particular interest. On the business side we have seen AMD and Intel settle their long-standing feud over accusations of anti-competitive behavior by Intel, which had several big outcomes for AMD this past quarter. As part of the settlement terms Intel paid AMD a cool 1.25 billion USD, officially to make up for past transgressions – and unofficially as life support for a company that lost money for the last 13 quarters.

On the technology side we’ve seen AMD’s graphics division spend an entire quarter driving their own destiny. With Fermi/GF100 delayed well in to Q1 of this year, Q4 was all about the Radeon 5000 series – and it would have been an even better quarter if only it weren’t for that pesky TSMC 40nm supply problem. AMD’s CPU division didn’t have quite as rosy of a time, but Intel’s price gaps below $200 have left AMD with a viable value market.

So with that in mind, how did AMD fare for the quarter and for the year? It’s a mixed bag, particularly if you throw out the Intel settlement. Perhaps a table will best get at this.

 

AMD Q4'09 & 2009 Operating Income
  Q4 Actual Q4 w/o Intel Settlement 2009 Actual 2009 w/o Intel Settlement
Overall $1178M -$64M $304M -$938M
Processors $158M x $127M x
Graphics $53M x $50M x

AMD booked the final Intel settlement at $1,242 million, giving us the difference between AMD’s actual results for the quarter and year, and what it would have been without the Intel settlement. Officially AMD booked a profit even without the Intel settlement if you go by their non-GAAP (Generally Accepted Accounting Principles) numbers, but we’re sticking with the GAAP numbers here and just yanking out the Intel settlement.

To put things in perspective, last year AMD lost $1.4 billion just on Q4’08, and $3.1B for all of 2008, so this is a massive turnaround for the company. At this point both of their core divisions are turning a small profit, and the company’s reduced exposure to the foundry business has greatly improved their bottom line. AMD took a loss of $99M in Q4 from their share of Global Foundries – so if they were able to drop the foundry business entirely, they would have likely turned a true GAAP profit. Although AMD has several problems, at the moment it’s the foundry business that continues to be doing the most harm to them.

On a broader market outlook, AMD was expected to lose some 18 cents a share this quarter (not factoring in the Intel settlement), whereas they actually only lost 8 cents a share, so the company beat the street in losing less than half as much as was expected. Certainly that’s good news for AMD, whose long streak of losing quarters has made it an unpopular item.

One thing of interest from AMD’s results was the average selling prices and gross margins. AMD doesn’t give us the exact ASP of their products, but they do compare it to previous quarters and years.

 

AMD Q4'09 & 2009 ASP
  Q4 vs Q3 ASP Q4'09 vs Q4'08 ASP 2009 ASP Q4 Gross Margin
Processors Up Down Down 45%
Graphics Up Down Down x

In spite of AMD’s overall better financial position, the ASPs in both the processor and graphics division has fallen both on a quarterly and yearly basis. This isn’t particularly surprising for the processor division with Nehalem regulating AMD to the sub-$200 market, but it is more surprising on the graphics side where AMD had not been able to sell a single-GPU video card for over $300 for years until now. It just goes to show you that the bulk of products really are sold at the low-end, where prices on older 4000-series products continue to slowly drop. Graphics revenue is a similar story: Up slightly on the year, but up significantly for the quarter compared both to last year and to Q3 of this year.

What is surprising is that considering AMD’s financial situation, their processor gross margin is pretty good. At 45% they’re no Intel (64.7%) but it’s the kind of margin the company needs to pay for things like R&D, particularly since they don’t move massive volumes of chips like Intel does.

Wrapping things up, the big thing for the company in 2010 is going to be that they’re finally going to escape the black hole that has been Global Foundries. ATIC – whose long-term plan has always been to completely buy-out GF from AMD – is expected to go through with that transaction soon now that Intel is no longer going to block the sale through the use of the x86 license. Since GF has been a losing proposition for AMD, in the short-term they stand to finally stop losing money on it, meaning they stand a good chance of turning at least a small profit overall since both processors and graphics are profit-generating. Of course it remains to be seen whether this is a great long-term strategy, but you can’t argue with the short-term effects on the balance sheet.

On the tech side, this quarter will see the launch of the rest of the Radeon 5000 series (Evergreen) chi p stack. 55nm products will continue to sell for quite some time, but it should be good for the ASP of the graphics division. Fuzion (CPU+GPU) products are still on-schedule for a launch late this year, so the CPU side of things should see a decent shakeup even though Bulldozer won’t make it this year. AMD mentioned that the first Fuzion products will be SOI-based, so it sounds like they’ll be making them at GF, with later products fabbed at additional foundries.

POST A COMMENT

30 Comments

View All Comments

  • The0ne - Monday, January 25, 2010 - link

    Intel does have good yields and this is in part due to their manufacturing processes. Once they have the processed "right" they locked it down preventing any further changes. This is arguable but it does work to a greater extent.

    Intel is the only company I know of that does this to maintain their yields. Typical manufacturing environments are constantly changing. Someday I'm going to have to visit these factories to truly observe how things are done :) Don't ask, I'm a Mfg Engineer myself.
    Reply
  • hyvonen - Sunday, January 24, 2010 - link

    TSMC is way behind Intel - if you recall, Intel was already showing a working 22nm wafer at the last IDF, while 32nm is mature enough to manufacture chips at yields high enough for sales... All this while TSMC has been struggling to get their 40nm to reasonable yields.
    Reply
  • subflava - Friday, January 22, 2010 - link

    Exactly...no one can keep up with Intel's fabs and that's why everyone has stopped trying. This is exactly why the foundries exist in the first place. Reply
  • MonkeyPaw - Tuesday, January 26, 2010 - link

    Intel's process tech it top notch because Intel is the first to buy the new manufacturing equipment needed for smaller nodes. They pay top dollar for that machinery, which is why Intel typically launches the highest-end CPUs on the newest process technology. The yields aren't great, but the prices are very high, so they get their investment back until the yields gets good enough for the rest of the product line. AMD on the other hand, has typically adopted new process tech much later, and they use the smallest nodes to sell their cheapest CPUs. As they improve the process, they ramp up speeds. It's basically the way a small volume company works versus a large volume company. Intel has to depend on tried-and-true processes to fill demand, while AMD depends on tried-and-true processes to compete at the high end. Both are valid approaches, and I really think that it works decently for both companies. Intel can react better to a bad node-shift versus AMD, so they can afford the risk. Reply
  • Shadowmaster625 - Friday, January 22, 2010 - link

    Looking at AMD's stock chart, it seems that players have been pricing in the intel settlement long before it happened.

    At 65% margin, intel is making 100 million for every 35 million they spend. That is highway robbery! If people had half a brain they would boycott...

    Want to see something funny? http://tinyurl.com/yda4ten">http://tinyurl.com/yda4ten This is a vietnamese thread talking about which is better, HD3300 or a 7300GT. Its funny as hell, but not too useful. I would go with the 7300GT, but I really wish you guys did more IGP vs discrete tests so I knew for sure.

    Reply
  • nofumble62 - Friday, January 22, 2010 - link

    Margin don't include all those payment. Reply
  • Hrel - Friday, January 22, 2010 - link

    who taught you math? If intel sold chips that in total cost 35Million and turned a 65% profit they'd bring in 57.75Million. Which is a profit of 22.75Million. Intel's profit margin would have to be 285% for 35Million in sales to bring in 100Million. Reply
  • je1117 - Sunday, January 24, 2010 - link

    Gross profit margin is gross proft (revenue - cogs) / total revenue. What he was saying is that AT 65% profit margin, Intel is making 100m for every 35m in selling costs. (100 - 35) / 100 = 65%.

    Profit and profit margin are two different things, who taught you business? ;)
    Reply
  • Hector1 - Friday, January 22, 2010 - link

    Do you think AMD wants Intel to lower prices so Intel's margin gets smaller ? What would happen ? AMD would be forced to lower prices as well, which would cause them to lose more money. Reply
  • fintel - Thursday, April 22, 2010 - link

    As far as blog is concerned here are so many interesting information Reply

Log in

Don't have an account? Sign up now