AMD Q3 FY 2014 Quarterly Earnings Analysis - 7 Percent Workforce To Be Cut
by Brett Howse on October 16, 2014 6:30 PM EST
This afternoon, AMD released their financial results for the third quarter, which ended September 27, 2014. While revenue was down slightly from Q2, the net income was positive for this first time this fiscal year. non-GAAP Earnings Per Share was $0.03, which missed analysts’ projections of $0.04. Earlier in the quarter projections were as high as $0.07 per share, but the Computing and Graphics segment was mixed this quarter due to “challenging market conditions” according to AMD.
Starting July 1st, 2014, AMD reorganized their reporting structure into two groups. The Computing and Graphics group focuses on desktop and notebook processors, chipsets, discrete desktop GPUs, and workstation GPUs. The Enterprise, Embedded, and Semi-Custom group includes server processors, embedded processors, dense servers, semi-custom SoCs, engineering services, and royalties, which is pretty much every market AMD is in other than the traditional desktop/notebook market.
| AMD Q3 2014 Financial Results (GAAP) | |||||
| Q3'2014 | Q2'2014 | Q3'2013 | |||
| Revenue (Billions) | $1.43 | $1.44 | $1.46 | ||
| Operating Income (Millions) | $63 | $63 | $95 | ||
| Net Income (Millions) | $17 | -$36 | $48 | ||
| Earnings Per Share | $0.02 | -$0.05 | $0.06 | ||
Revenue for Q3 2014 was $1.43 billion, down just under 1% from Q2 2014’s $1.44 billion. As compared to Q3 2013, revenue was down 2%. Operating Income was $63 million (non-GAAP $66M) for the quarter, which is also down from the previous quarter and year-over-year. Net income was $17 million (non-GAAP $20M) for the quarter which is up from the $36 million loss last quarter, but down from $48 million profit in Q3 2013. Gross margin was flat from last quarter at 35%.
| AMD Q3 2014 Financial Results (Non-GAAP) | |||||
| Q3'2014 | Q2'2014 | Q3'2013 | |||
| Revenue (Billions) | $1.43 | $1.44 | $1.46 | ||
| Operating Income (Millions) | $66 | $67 | $78 | ||
| Net Income (Millions) | $20 | $17 | $31 | ||
| Earnings Per Share | $0.03 | $0.02 | $0.04 | ||
The Computing and Graphics segment revenue decreased 6% from last quarter and 16% year-over-year. AMD states the primary decrease is due to by lower chipset and GPU sales as compared to last quarter, and decreased notebook processor and chipset sales as compared to a year ago. The Operating Loss for the division was $17 million, which is up (or down, depending on how you look at negative numbers) substantially from the $6 million loss last quarter and $9 million loss in Q3 of last year. The Average Selling Price (ASP) of CPUs/APUs actually increase sequentially and year-over-year. Discrete GPU ASP decreased over last quarter, but increased over the same period last year. The Computing and Graphics segment is a tough market for AMD right now. Intel is moving to 14 nm while AMD has to rely on Global Foundries and other fabs to attempt to catch up. This hampers their ability to match Intel on the performance per watt metric certainly. On the GPU front, NVIDIA just released the Maxwell based GTX 980 and 970, as well as the mobile counterparts which have shown impressive performance, and efficiency. Hopefully AMD can counter with some new products in the near term.
The Enterprise, Embedded, and Semi-Custom division fared much better for Q3, with a 6% sequential gain in revenue and 21% year-over-year. Operating income for the quarter was $108 million which was up from the $97 million of Q2, and $92 million of Q3 2013. As with the last couple of quarters, AMD attributes the gains primarily due to increased sales of semi-custom SoCs. Their embedded revenue grew by “double digits” as compared to last quarter. Clearly AMD has found a niche here where they can use their expertise in new markets to shore up the company, and so far, it has been successful. In addition, AMD has closed two new Semi-Custom SoC designs this quarter which should help this division continue its growth.
| Results Per Division | |||||
| Q3'2014 | Q2'2014 | Q3'2013 | |||
| Computing and Graphics Revenue (Millions) | $781 | $828 | $925 | ||
| Computing and Graphics Operating Income (Millions) | -$17 | -$6 | $9 | ||
| Enterprise, Embedded, and Semi-Custom Revenue (Millions) | $648 | $613 | $536 | ||
| Enterprise, Embedded, and Semi-Custom Operating Income (Millions) | $108 | $97 | $92 | ||
In addition, AMD is also trying to cut costs by reducing their workforce by about 7% Currently, they have 10,149 employees as of the end of Q3, which means around 710 people will be cut from the company. Most of these cuts should be done by the end of Q4. AMD will then adjust their real estate footprint to accommodate the smaller workforce, which could mean additional infusions of cash from the sale of buildings. They are hoping to have savings of $9 million for Q4 and $85 million for FY 2015.
Their forecast for Q4 is not rosy either. AMD is expecting revenue to decrease 13% from Q3, plus or minus 3%. However they are also hoping to drop expenses from the current guidance of $420 to $450 million, to $385 million, which means they are hoping for a positive non-GAAP free cash flow.
Although AMD did miss investor earnings, they did not miss by much and the net result was a quarter where the company managed to turn a tiny profit, which is in stark contrast to the first couple of quarters for 2014. Unfortunately, AMD’s losses all stem from the desktop PC industry. Intel just had a record quarter, so there is certainly money to be made in this sector. We will have to see how Dr. Su, the new CEO of AMD, addresses this for the next quarter.
Source: AMD Investor Relations
Facebook
Twitter
RSS
81 Comments
View All Comments
rocketbuddha - Friday, October 17, 2014 - link
Intel is also now in the semi custom game to a degree (though they hate to admit it). They carefully ensure that their bed and butter is still bringing in the dough though.http://seekingalpha.com/news/2031045-intel-talks-s...
<quote>
He added Intel's new Grantley Xeon CPUs are seeing strong uptake, and that the chip giant now has 35 custom Xeon SKUs for various clients. Facebook, eBay, Microsoft, and other Web giants have been avid buyers of custom Intel server CPUs.
<end quote>
Intel wants Atom variants to fight the ARMy not AMD. But basically due to contra bribes, acceptable performance and better power characteristics, it basically has killed Mullins and any other Tablet SOC that AMD can field in that area. Further they have specific low power Core i SKUs for real performance + acceptable power. So AMD is sandwiched between a
a) Lower performance + Lower power sucking + heavily contra bribed SKU platform that runs both Android and Windows x64
b) Higher performance + similar (may be slightly) higher power sucking non subsidized SKU platform that runs both Android and Winx64 with partners like Asus doing dual booting etc.
And Rory Reed was adamant in pooh-poohing anything but Windows 8.x for AMD and see where it led it into.
With respect to ARM server business, currently Applied Micro(ApM) is shipping its X-Gene which is its own implementation of ARM V8 ISA aka ARM 64 custom core. While AMD's Seattle would be a ARM Cortex A57 derivative. It will be 2016 before AMD would have an answer for that. And if the ApM custom core turns out to be faster that Cortex A57, then AMD is again fighting on the price front and likely losing money.
BTW if you look HP's Moonshot servers which originally was supposed to include AMD x64 (and possibly ARM64), now has the following
http://www8.hp.com/us/en/products/servers/moonshot...
m4xx - ApM XGene ARM64
m8xx - TI Keystone II ARM32 Cortex
m7xx - Low power Xeons x64
So AMD has its a**e handed by HP (which is even till date largest AMD client) by excluding both its x64 as well as ARM64 products. One of the reasons could very well be that AMD basically is now competing with HP, DELLs and IBMs after Sea Micro acquisition. So no magic hat thinking for AMD. It is going to be bloody for longer time.
melgross - Friday, October 17, 2014 - link
If Bulldozer even came close to matching, not the hype, but AMD's statements about performance, they would have been much better off. As it was, they were avoided. It's been a continuation of their slippery slope downwards.They had a two and a half year respite when Intel got cocky with Netburst, and their newly industry leading chip processes. But Intel turned that around, and AMD went back to become an also ran.
testbug00 - Friday, October 17, 2014 - link
If anything, AMD is just turning around...They've gotten past the issues their fabs brought, ATI's over-valuation, and, their APUs are finally reaching into areas where they can prove what they do.
Will they grow massively? I HIGHLY DOUBT that. But, I think they will be able to grow bar no shenanigans from competitors.
HighTech4US - Friday, October 17, 2014 - link
Quote: If anything, AMD is just turning around...You and others said the same thing when Rory came on board and we all see how that turned out.
AMD is in a slow death spiral and at the very end all that may remain is the Consoles and a company trying to sell their IP.
testbug00 - Friday, October 17, 2014 - link
No, I don't think I said anything when Rory came on board. I will say it now that I see results happening.AMD is not in a slow death spiral, if their ARM efforts flop AND their new x86 chip flops, yes, I agree.
However, I don't think both will, the x86 chip, maybe... The ARM chip, I doubt it.
melgross - Friday, October 17, 2014 - link
What results? You sound like a BlackBerry guy. Something will magically happen to save the company.HighTech4US - Friday, October 17, 2014 - link
Testbug00 is a frequent poster on SemiAccurate and the posters that charlie allows to post there (I.E. Charlie bans those who do not follow his doctrine) all tote from the AMD fanboi bible that AMD can do no wrong and Intel/Nvidia can do no right.You can check out Testbug's posts here: http://semiaccurate.com/forums
Testbug's posts concerning Nvidia are always so full of bile that I sometimes wonder if he is actually Charlie with a different ID.
GreenToTheGills - Saturday, October 18, 2014 - link
Nice Ad hominen. While we're digging through everyone's online histories let's take a look at why you seem to have a problem this poster and a site he frequents.http://semiaccurate.com/forums/member.php?u=3046
http://semiaccurate.com/forums/search.php?searchid...
Hmm... Oh look at that, that last post you made was removed for trolling on that forum. What's trolling, oh wait, trolling's making pointless Ad hominen attacks just like you've done here. QED HighTech4US is a troll. Bring home the cows and leave this guy out to pasture because he's exactly the kind of commenter that's ruining Anandtech.
melgross - Friday, October 17, 2014 - link
Grow? They keep shrinking. Why do you think they are having another round of layoffs?Kjella - Friday, October 17, 2014 - link
Turning around? Last year (2013) from Q3 -> Q4 they went up 9% in revenue. It's supposed to be a good quarter with Christmas sales and all. Now they're predicting a 13+/-3% decline in revenue. Their CPU/GPU business continues to trend down and losing money, semi-custom revenue is a spin-off of their general purpose technology. You can see their long term business dying, even if they're propped up by short time business right now.