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
atlantico - Friday, October 17, 2014 - link
You left the AM3+ platform because there's no upgrade path and went to 1150 which has absolutely no upgrade path either? By the time you're going to want to upgrade, the socket is going to be dead as a doornail. Good grief.But good that you're happy with your i5 4690K, that's a fine CPU. It's just that the FX8350 isn't noticeably worse.
http://cpuboss.com/cpus/Intel-Core-i5-4670K-vs-AMD...
testbug00 - Friday, October 17, 2014 - link
except, of those "millions" of PCs I doubt over a hundred thousand would upgrade. And, a hundred thousand is being very generous.Not worth the cost. 20nm Radeon's you say...
ppi - Friday, October 17, 2014 - link
Do you remember Radeon 5870 story? First on new node with GTX 480 far far away.They no doubt wanted to pull that off again, but the process tech did not click in this time.
ppi - Friday, October 17, 2014 - link
AM3+ compatibility is overrated. With all those new SATA, PCIe and networking standards, you want new mobo anyway. Especially when AM3+ has like 10 years old roots.Atari2600 - Friday, October 17, 2014 - link
Easy to say, but they badly need a step change in single thread performance - and a process shrink from their fab partners. Kinda hard to compete with 14nm (Broadwell) when your stuck on 28nm. [Assuming all else being equal; thats a 1/4 the area!!]Needing to differentiate themselves from Intel in some way or form; perhaps AMD should stick to quad core or lower, meaning a relatively higher area budget per socket for each core and also allowing a proportionally higher transistor budget for the decode logic where they painfully lag behind.
If Jim Keller manages to pull off anything of note, then he truly will have earned his crust.
silverblue - Friday, October 17, 2014 - link
They fixed the decoder with Steamroller; they just don't have the execution resources per thread (correct me if I'm wrong).sonicmerlin - Friday, October 17, 2014 - link
AMD plans on competing with Intel by releasing yet another Bulldozer CPU with a lower IPC than their K series Athlons.silverblue - Saturday, October 18, 2014 - link
Eh? You might want to provide a link.PCjunkieXL - Friday, October 17, 2014 - link
Well, I think it really has all to do with Intel having new product, while AMD's AM3+ socket is old, and the refresh chips aren't enough reason to invest in what most people already think of as a dead socket.The APU's are neat chips, but considering my Phenom II 955 BE can outperform those chips on some benchmarks, and that the internal GPU's are nice, but not quite nice enough to properly replace a discrete GPU for gaming, it makes you wonder, what market is AMD aiming at with the APU's?
It's the only platform that has some modern chipsets currently from them. The Intel Z97 and X99 have all the latest and greatest features and there is nothing even close to those in the AMD camp.
I have always valued AMD for their performance to price ratio's versus Intel's, but at this point, I'm in the market for a new PC and there is nothing in the AMD camp to interest me at all, not even GPU's considering Maxwell just launched.
The AM3+ socket is basically dead. The features and PCIe 2.0 just aren't going to cut it for me if I'm going to invest in a new platform, I WANT the newest of the new features and hope it lasts for another 4 to 5 years, like my current PC did.
The APU's, there is nothing there to work with, since I game, and the graphics in those APU's aren't going to be enough for games I want to play and have high settings the way I want.
The graphics cards, with the R series had some nice cards, but even then, I was willing to look at Nvidia because the R series high end stuff chewed up more power than I'm willing to deal with.
Now with the Maxwell release, there is zero reason to even buy the high end R series, when you can get a 970 that has damn near the same performance, or better, than the R290 and has much better efficiency which will equal a lower energy bill each month.
It's no wonder Intel had a record quarter... when AMD really doesn't have anything to offer the PC desktop market at the moment.
Sure you can argue the price differences and for budget gamers or people not needing all the newest features AMD does have plenty of that to offer, but it seems that segment isn't enough to keep the money from going Intels direction.
I just hope AMD does manage to come out with something by next year, because without the competition, Intel would be able to charge whatever they want (although, I think they already do) without AMD at least nibbling enough to keep the prices in somewhat of a check.
nofumble62 - Saturday, October 18, 2014 - link
If there is any talent left at AMD?