It’s the middle of April and that means it’s once again earnings season for the prior quarter.

Late yesterday AMD released their earnings report for Q1 2012, and it turned out to be a bit of a doozy. For the quarter AMD brought in $1.59 billion in revenue, with a net loss of $590 million. This is compared to $1.61B in revenue and a $510M net profit in Q1 of 2011, meaning AMD’s revenue is slightly down on a year-over-year basis, while their net income went well into the red.

AMD Q1 2012 Financial Results
  Q1'2012 Q4'2011 Q1'2011
Revenue $1.59B $1.69B $1.61B
Net Income -$590M -$177M $510M

Overall, while things have been going modestly well for AMD lately thanks to the strength of their product lineup, their stake in Global Foundries has continued to drag down the company’s profits. In Q4’11 AMD had to take $209M charge that drove them into the red then, and Q1’12 has not fared any better.

As you may recall, last month AMD fully divested themselves of Global Foundries, eliminating their 8.8% share of the company. This divestment was part of a larger revision of AMD’s wafer agreement with GloFo, which saw AMD giving up their share in the foundry as part of a larger payment to GloFo in order to get out of a previous exclusivity agreement with GloFo that had entitled them to production rights on some 28nm APUs. Altogether AMD has taken a $703M charge, composed of cash and and their GloFo stake, in order to get out of using GloFo's 28nm process; and that's every bit as bad as it sounds.

The good news of course is that AMD’s GloFo-related financial troubles are almost at and end now that they no longer hold a stake in GloFo, with the bad news being that there are still a few more payments to go until they’re fully freed. On top of the $703M charge for Q1, AMD owes a further $275M to GloFo over the next year, with AMD choosing to write all of this off in their $703M charge for Q1. However once they’re paid off next year, that’s it – AMD will have no further financial ties to GloFo, with the only remaining ties being the contract fab work GloFo does for AMD.

In any case, not counting their problems with GloFo, AMD’s non-GAAP net income for Q1’12 would have been $92M, which is a small but notable increase over their non-GAAP net income of $56M in Q1’11. Even though revenues were down, AMD’s operating income from both GPUs and CPUs is up versus 2011, reflecting the higher gross margin attached to AMD’s latest generation of products.

AMD Q1 2012 Computing Solutions Division Financial Results
  Q1'2012 Q4'2011 Q1'2011
Revenue $1.203B $1.309 $1.2B
Operating Income $124M $165M $100M

In particular, on the CPU side of things the average sale price for AMD CPUs has held steady, but overall costs have come down slightly, making it a net win for AMD. CPU revenue for Q1’12 was $1.203B with an operating income of $124M, versus $1.2B and $100M for Q1’11. All things considered Bulldozer doesn’t seem to have lit a fire under AMD, and the lack of new APUs to replace Brazos isn’t helping, but at the very least AMD is holding their ground.

AMD Q1 2012 Graphics Division Financial Results
  Q1'2012 Q4'2011 Q1'2011
Revenue $382M $382M $413M
Operating Income $34M $27M $19M

Meanwhile on the GPU side of things this was the first quarter where AMD’s new Southern Islands GPUs were shipping, which is both good news and bad news for AMD. Traditionally quarters where major new GPU architectures are introduced see lower revenue as customers hold off on purchases, and with the launch of Southern Islands early in the year this was no exception. However new GPUs also launch at higher prices, which pushes margins up. The net result is that while revenue takes a step back profits increase, which is exactly what AMD needs at the moment.

Altogether AMD booked $382M of GPU revenue in Q1’12 with an operating income of $34M, versus 413M in revenue with an operating income of only $19M in Q1’11. The increase in operating income over Q1’11 is thanks in large part to AMD’s nearly quarter-long 28nm product lead, combined with AMD’s conservative pricing. Q2’12 should see revenue improvements as AMD will have been shipping desktop SI GPUs for the entire quarter along with introducing mobile SI GPUs, however as we saw earlier this week AMD’s conservative pricing has already eroded due to a need for price cuts, meaning that AMD’s margins will likely be going down.

Moving forward, Q2’12 is widely expected to see the launch of AMD’s Trinity APU, which should give their CPU business a shot in the arm. At the same time we’re expecting AMD to finally launch Southern Islands products for the mobile market, which will be important for AMD as their mobile GPUs are high volume products.



View All Comments

  • Bull Dog - Friday, April 20, 2012 - link

    Thanks for taking the time to distill down what the numbers really mean. Reply
  • fredisdead - Monday, April 23, 2012 - link

    check amds stock price lately, or search on this term ...
    'interlagos design win'

    anand, LOL
  • silverblue - Friday, April 20, 2012 - link

    Wouldn't this be responsible for a good proportion of the loss, or will it fall under another period? Reply
  • Ryan Smith - Friday, April 20, 2012 - link

    Technically speaking the acquisition is nearly neutral. AMD spent some cash to acquire an asset, which means the books simultaneously reflect the loss of cash and the gain of an asset.

    In practice AMD actually came out ahead on the Seamicro acquisition: ignoring what they directly paid for Seamicro, they had 6mil in acquisition costs (that is, costs for lawyers and such), but realized a tax benefit of 36mil, meaning they came out 30mil ahead.
  • Lonyo - Friday, April 20, 2012 - link

    It falls under the current period and other periods. It impacts the balance sheet more, as it is capital expenditure, and doesn't have a significant impact on the income statement, where you see profit or losses.

    Rather than being reflected as an expense for the current year, the cost is amortised over the life of the acquisition. They pay $334m now, and if it had a life of 10 years or so, you would might see an expense of $33.4m/yr, give or take, reflecting the decline in value of the purchase over time.
  • silverblue - Friday, April 20, 2012 - link

    Many thanks to you both; I must confess that I know little about financial dealings. :) Reply
  • shriganesh - Friday, April 20, 2012 - link

    Ryan! I thought your were a GPU and graphics specialist! But now you write articles as though you are a financial analyst! Well done and great job! Reply
  • Wreckage - Friday, April 20, 2012 - link

    Unless AMD finds a buyer soon, I imagine bankruptcy is on the horizon. Reply
  • BSMonitor - Friday, April 20, 2012 - link

    They are good now. They now compete solely like nVidia. No Fabs. No losses from fabs. Let the Arabs in Abu Dhabi take the losses at GloFo. They should have done this long ago.

    What this really proves is how difficult and expensive it is to continually upgrade Fabs to new process nodes. The fact that Intel does it so well, now, is simply a testament to their ability to learn from their own past. Too bad they will never offer to manufacture other companies designs at their Fabs. Could be interesting.
  • silverblue - Friday, April 20, 2012 - link

    And, despite many people calling NVIDIA's demise over the past couple of years, it's never been remotely close to happening.

    It's great to have fabs... if it didn't cost so much to upgrade them and work your way towards a mature process, that is. As AMD don't have to pay GloFo for failures, the only thing AMD can lose money on is not getting enough product back after aforementioned failures. I'm definitely simplifying it, though.

    Fab 8's completion should provide a decent boost to 28nm production during the second half of this year, should AMD decide to sign up for it.

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