The Business of Tech: AMD Q4 2009
by Ryan Smith on January 22, 2010 12:00 AM EST- Posted in
- Ryan's Ramblings
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.
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Spivonious - Friday, January 22, 2010 - link
Getting out? They lost almost a billion dollars before the Intel settlement. Unless AMD comes up with a real competitor to Nehalem I don't think they'll be around in 5 years.bsoft16384 - Friday, January 22, 2010 - link
Well, whether or not Bulldozer is a competitor to Sandy Bridge, AMD is going to be around in 5 years. Now that they don't have an unprofitable fabrication business dragging on the balance sheet, even the graphics side of the business is enough to keep AMD afloat.Intel has shown that getting into the GPU business isn't as easy as it looks. There are basically two players: AMD and NVIDIA, and NVIDIA keeps shooting themselves in the foot with GPUs that are too late and too expensive. The bulk of the graphics business is in mainstream and mid-range parts ($50-$150) and ATI has a much stronger lineup for the foreseeable future.
Then we have design wins with things like Congo, AMD's more-competitive low-end and mid-range parts (Athlon II and Phenom II), and the upcoming launch of the new 890GX chipset that should have no problem humiliating even the "new and improved" Intel GMA.
We're probably not going to have another "Athlon 64 / Opteron" moment. Intel doesn't screw up as badly as they did with Prescott very often. The dominance Athlon 64 was a combination of Intel's inability to scale P4 to the clocks they wanted combined with AMD's best executed design since the Athlon. There's no "real competitor" to Nehalem coming for a long time.
What (hopefully) will happen is that AMD will improve power consumption in mobile parts, get better chipsets with lower power consumption, better graphics and features like USB 3.0, and continue to execute well in their graphics division.
BSMonitor - Friday, January 22, 2010 - link
Funny. How can one talk about AMD financial success and Global Foundries financial woes seperately. It is all Accounting nonsense. So you take the cost of development and upgrading chip-making Fab's and stick on a seperate balance sheet called "Global Foundries". Global Foundries only real revenue comes from AMD.AMD makes a few dollars profit now.. Because the cost of chip-building is on a different balance sheet. Well guess what, the cost of chip-building is still too much for "Global Foundries" and they consistently lose money. Eventually Global Foundries goes bankrupt and AMD has no chip-builder...
Ask GM and Delphi(or its many other suppliers) how well this works.
subflava - Friday, January 22, 2010 - link
You would be right if Global Foundries didn't plan on doing anything else except make chips for AMD. It would be just an accounting trick in that case. However, I assure you that the guys that bought Glo-Fo, (Abu Dhabi ATIC), did not spend $2.1B out of kindness to AMD. In addition they have since gone and spent another $3.9B for Chartered and merged the two companies. They plan on turning Glo-Fo into a legitimate foundry business to compete with Taiwan Semiconductor. This move was definitely about more than just accounting shenanigans.Penti - Saturday, January 23, 2010 - link
Remember GF bought Chartered which already did have other customers on the AMD APM process. They already has all the tools for others to use them, both in Dresden and Singapore. And AMD was already fabbing CPUs at CSM. AMD plan to move some of the ATi-graphics stuff to GF. As well as chipsets. GF got plenty of other customers today which will scale up their business with them if GF offers a good deal to them. AMD only wants one fab to deal with that's pretty clear. (For CPUs, chipsets, APUs any way). They can streamline all the tools then. And it's not TSMC. There's plenty of companies ready to use and are using something other then TSMC. So all they need to do is get people designing for their plants. Something Chartered already has plenty of experience with.cocoviper - Saturday, January 23, 2010 - link
Yep- I spoke with some ARM individuals at CES and they intend on doing a massive push for 28nm with GF.It won't be AMD only for long...
Taft12 - Friday, January 22, 2010 - link
Eventually Global Foundries goes bankrupt and AMD has no chip-builder...Why does Global Foundries need to be the chip-builder for AMD?
ssj4Gogeta - Friday, January 22, 2010 - link
I don't think any other foundry will be able to keep up with Intel's fabs.OCedHrt - Saturday, January 23, 2010 - link
TSMC is ramping 28 and starting 22. In terms of keeping up in that area, they're doing fine..in terms of capacity...well that's another story.Hector1 - Monday, January 25, 2010 - link
Re "TSMC is ramping 28"You've misread whatever you read. "Ramping" implies volume production has begun and that the volume is being increased week-to-week.
TSMC has not started volume production of 28nm. Their press release of Jan 10 states "TSMC is currently conducting R&D for 28nm" and "will hand 28nm to the Phase 5 facility for volume production in the fourth quarter of 2010" They're a long way from shipping production units. They say they just fixed their yield problems on 40nm. It's unlikely that they'll be shipping real 28nm production volume until 2011 at the earliest