Thanks to consoles, AMD posts first profit in over a year

[Boomstick777]

Yeah, AMD can't execute, so

Would be a shame if they blunder this chance, with Intel slowing down their pace, and AMD finally able to move onto a new node. The pieces are set in place. It would take a failure of truly epic scale to mess it up

 

[cheesyboy]

AMD's CPU compute division bring far more bacon in than GPU

                                    Quarter Ended          Nine Months Ended
        -------------------------------------------------------- -------------------
        Segment and Category       Sep. 28,  Jun. 29,  Sep. 29,  Sep. 28,  Sep. 29,
         Information                 2013      2013      2012      2013      2012
        -------------------------------------------------------- -------------------
        
          Computing Solutions (1)
            Net revenue            $    790  $    841  $    927  $  2,382  $  3,176
            Operating income
             (loss)                $     22  $      2  $   (114) $    (15) $     92
        
          Graphics and Visual
           Solutions (2)
            Net revenue                 671       320       342     1,328     1,091
            Operating income             79         -        18        95        83
        
          All Other (3)
            Operating loss               (6)      (31)      (35)     (112)     (809)
        
          Total
            Net revenue            $  1,461  $  1,161  $  1,269  $  3,710  $  4,267
            Operating income
             (loss)                $     95  $    (29) $   (131) $    (32) $   (634)
        
        -------------------------------------------------------- -------------------

http://www.marketwatch.com/story/am...arter-results-2013-10-17?reflink=MW_news_stmp

Graphics and visual has been the money-maker this quarter, driven by their semi-custom business (those console APUs);

-- Graphics and Visual Solutions (GVS) is comprised of graphics
processing units (GPUs), including professional graphics, as well as
semi-custom products and development and game console royalties.
-- GVS segment revenue increased 110 percent sequentially and
increased 96 percent year-over-year driven largely by our
semi-custom business. GPU revenue declined sequentially and
year-over-year. In the third quarter customers began transitioning
to our new products late in the quarter.
-- Operating income was $79 million compared with breakeven in Q2
2013 and $18 million in Q3 2012.

 

[drunkenmaster]

Console GPU's are virtually supplied at cost, there's hardly any profit in it, hell Sony/MS sell the things at a loss for ~3 years to try and grab market share. The reason ATi/Nvidia made console GPU's for the previous two gens was because it was good PR/publicity not because it made big money.

No they aren't, it's highly profitable, most importantly because AMD is selling them the chip, not the IP. Look at ARM, they have a fraction of the revenue AMD does despite getting income from IP of probably billions of chips a year now. Devices > chips > ip in profitability, to a degree a magnitude of difference each time, though so many people sell devices at a loss for software now. Consoles, phones(some), tablets(some), while things like Iphones, mac's in general all charge a massive premium and generate a profit way above what they could if they were selling the chips to someone else.

ATi only had an IP deal on the 360, Nvidia sold chips to MS for the Xbox, but got in a huge fight over pricing at one stage which is what made MS go Ati for the next console and many people would suggest that Sony went Nvidia less because they wanted to go Nvidia and more because MS had already signed up ATi and they didn't(or maybe MS paid them to be exclusive) want to go the same way. AMD is supplying for certain the chips for the PS4 and recently it's being suggested they are selling chips to MS as well though previously it was thought that was an IP deal.

Either way both will make AMD a very decent wedge of cash in the next 5 years, WAY above the current console deals for AMD or Nvidia, supplying bigger chips, selling the actual chips and not IP.

AMD's console specific income was said to be 50-100mil for Q3 and aiming at 250mil for Q4, that was what they've predicted throughout most of the last year. Q3 has already proved true, supposedly due to demand at least Sony has upped their production so Q4 could be even higher. Console sales start more slowly, that 250mil a quarter figure should increase before it goes down in later years when the chips are being made on newer processes.

Nvidia were dumped from the consoles, simple as that, they couldn't remotely compete.

APU all in one chip was completely unmatchable in cost by Nvidia/Intel or Nvidia/AMD non APU, and on power as well. When you get to competitive companies trying to mix parts and coming up with new interconnects... AMD had the consoles in the bag when they bought ATi and actually made a decent APU, no other company could offer a cpu + gpu that were designed to work together above arm/mobile level performance.

 

[Boomstick777]

@cheesyboy ^^ Nice find.

 

[Gregster]

Spoiler

                                    Quarter Ended          Nine Months Ended
        -------------------------------------------------------- -------------------
        Segment and Category       Sep. 28,  Jun. 29,  Sep. 29,  Sep. 28,  Sep. 29,
         Information                 2013      2013      2012      2013      2012
        -------------------------------------------------------- -------------------
        
          Computing Solutions (1)
            Net revenue            $    790  $    841  $    927  $  2,382  $  3,176
            Operating income
             (loss)                $     22  $      2  $   (114) $    (15) $     92
        
          Graphics and Visual
           Solutions (2)
            Net revenue                 671       320       342     1,328     1,091
            Operating income             79         -        18        95        83
        
          All Other (3)
            Operating loss               (6)      (31)      (35)     (112)     (809)
        
          Total
            Net revenue            $  1,461  $  1,161  $  1,269  $  3,710  $  4,267
            Operating income
             (loss)                $     95  $    (29) $   (131) $    (32) $   (634)
        
        -------------------------------------------------------- -------------------

http://www.marketwatch.com/story/am...arter-results-2013-10-17?reflink=MW_news_stmp

Graphics and visual has been the money-maker this quarter, driven by their semi-custom business (those console APUs);

Let's pretend for a minute that I am a complete doughnut and have no idea what that means. For the sake of the others, would someone like to explain all that

 

[555BUK]

It's a little early to judge yet. Nobody knows AMD's margins on console parts, and for all we know they could be selling at cost or even a loss to start off with. It will certainly take some time to recover initial R&D and Production costs, and final results will depend on how well the consoles sell and how good the content made for them is received.

The fact that AMD won both contracts proves that they sold below a level which NVidia was willing/able to match. That makes it likely that margins will be low at best, and that they will be heavily reliant upon volume sales.. Lets hope for no RROD and similar issues, and lets hope that consoles maintain or grow market share against mobile and tablet Apps, which have already decimated PC and console hardware and game sales.

Success for the PS4 and XBOX One are by no means certain, and neither are really game changers in the way that the PS3 & 360 were. I will certainly hold off buying until long after the dust settles.

 

[LtMatt]

Nvidia can't produce a cpu so there was never any chance of them being in the next gen consoles as DM has already pointed out. Anything you read from Nvidia about the margins were too small for them is just PR.

 

[Kaapstad]

Let's pretend for a minute that I am a complete doughnut and have no idea what that means. For the sake of the others, would someone like to explain all that

It looks like they are getting a lot more revenue on the computing side but losing money on it.

They are getting less revenue on graphics but it is more profitable.

Or putting it another way, they need to get the computer side of things sorted out fast.

 

[Gregster]

It looks like they are getting a lot more revenue on the computing side but losing money on it.

They are getting less revenue on graphics but it is more profitable.

Or putting it another way, they need to get the computer side of things sorted out fast.

Yer, that is exactly how I read it

Cheers Kaap.

 

[XE11]

i was more thinking on the line of fancy accounting. almost every big company will somehow end up in the red so they pay as little tax as they can. but now amd suddenly gained a lot of console users and unavoidably a lot of nothing-better-to-do world-haters, they will need to start making some profit and pay tiny bit of tax so they can avoid having their accounts dug round....

 

[drunkenmaster]

It's a little early to judge yet. Nobody knows AMD's margins on console parts, and for all we know they could be selling at cost or even a loss to start off with. It will certainly take some time to recover initial R&D and Production costs, and final results will depend on how well the consoles sell and how good the content made for them is received.

The fact that AMD won both contracts proves that they sold below a level which NVidia was willing/able to match. .

All of that is nonsense. Device makers often sell at a loss to drive software sales, the companies that provide the parts DO NOT, ever. If AMD sold $50 chips for $30, and loads of other bits sold under cost, then MS/Sony wouldn't actually sell their devices at a loss. It simply won't happen, there is 0% chance AMD are selling at a loss.

likewise the fact AMD won both contracts absolutely in no way at all proves they sold below a level which Nvidia was willing/able to match, that is nonsense.

Nvidia could not offer a cpu + gpu, they don't actually offer a part either console maker would want in their console. You can't undercut someone else who isn't in the competition. AMD were the ONLY choice for a high end gaming APU, the ONLY choice, that puts them in an incredibly strong position in negotiations.

The cost of a discrete GPU + CPU + R&D on interconnects and dealing with various different companies is significantly higher than one part where 90% of the R&D was done already(because Jaguar/GCN and Kabini were basically done and the changes are relatively minor).

This is aside from the fact that Nvidia and MS got into a very public, needing to be arbitrated dispute over chip pricing on the Xbox, which pretty much resulted in MS semi publically saying they wouldn't work with Nvidia on a console again.

Likewise Sony and Nvidia got into a less public, much less bad spat but still felt screwed by Nvidia on their deal and pretty much made it known they didn't want to work with Nvidia on their next console either.

AMD provide the only even possible APU design for a console AND both console makers don't want to make a console with Nvidia again..... that is literally as strong a position as AMD could have been in going into the consoles.

 

[cheesyboy]

It looks like they are getting a lot more revenue on the computing side but losing money on it.

They are getting less revenue on graphics but it is more profitable.

Or putting it another way, they need to get the computer side of things sorted out fast.

CPU side is looking ok. In a declining market, they have slimmed down and turned big losses into a small profit. Admittedly, much of those losses from Q3 2012 was due to a $100m writedown of Gen-1 APU stock (basically, they had a ton of FM1 CPUs sat around when they moved over to FM2).

Interestingly, the decline in revenue in the CPU segment here is due to reduced notebook and chipset shipments, mitigated a little by desktop unit shipments actually increasing.

 

[cheesyboy]

i was more thinking on the line of fancy accounting. almost every big company will somehow end up in the red so they pay as little tax as they can. but now amd suddenly gained a lot of console users and unavoidably a lot of nothing-better-to-do world-haters, they will need to start making some profit and pay tiny bit of tax so they can avoid having their accounts dug round....

Small (owner managed) companies want to avoid profits due to tax. Big companies answer to shareholders, and by definition have a responsibility to maximise shareholder wealth. this means maximising share price and/or dividends. You don't achieve that by manipulating a profit into a loss.

 

[555BUK]

Nvida do package CPU/GPU parts for mobile devices, but not x86 processors. AMD clear;y has the lead here as far as ingle chip implementation is concerned, but there was nothing preventing the use of seperate CPU/GPU parts from rivals like NVidia & Intel. In the end AMD obviously supplied the best balance balance between features, performance and cost, but I find it highly unlikely that AMD will make a real profit from consoles for some time. They may well write off R&D and Production costs into previous quarter accounts, but overal profits for console SoC's will take time, and will be dependend upon console sales.

 

[layte]

No they aren't, it's highly profitable, most importantly because AMD is selling them the chip, not the IP. Look at ARM, they have a fraction of the revenue AMD does despite getting income from IP of probably billions of chips a year now. Devices > chips > ip in profitability, to a degree a magnitude of difference each time, though so many people sell devices at a loss for software now. Consoles, phones(some), tablets(some), while things like Iphones, mac's in general all charge a massive premium and generate a profit way above what they could if they were selling the chips to someone else.

No it's really not. Console part suppliers really do live with razor thin margins. Like I said in a previous post, AMD sold +200m console GPU's last gen and for most of it they were leaking money. Only recently with the 6/7K series GPU's doing the business have they turned things around.

We know Nvidia turned away the business as they didn't want to live with the costs/margins Sony and Microsoft were demanding.

 

[cheesyboy]

No it's really not. Console part suppliers really do live with razor thin margins. Like I said in a previous post, AMD sold +200m console GPU's last gen and for most of it they were leaking money. Only recently with the 6/7K series GPU's doing the business have they turned things around.

We know Nvidia turned away the business as they didn't want to live with the costs/margins Sony and Microsoft were demanding.

The accounts tell a different story.

Last quarter graphics dept revenue was $320m with breakeven result ($0 profit).
This quarter, whilst console APUs have been shipping, revenue was $671m with $79m profit.

So, taking a very simple view on it, an increase of sales of $351m (671 minus 320) resulted in an increase in profit of $79m. A net profit of 22% of revenue (79 divided by 321) is pretty impressive, I would say.

Another way of phrasing that Nvidia excuse would be "we couldn't get our costs down to the level of AMD". In effect, AMD are able to make a profit at a price Nvidia couldn't (due, probably, to their CPU assets)

 

[layte]

Shipments of console GPU's will be a million units max in that time frame. Please don't try and claim such an increase is down to that. AMD have pulled their finger out over the past 12 months and have been selling 7000 series cards like gangbusters, this very forum is testiment to that.

 

[cheesyboy]

Shipments of console GPU's will be a million units max in that time frame. Please don't try and claim such an increase is down to that. AMD have pulled their finger out over the past 12 months and have been selling 7000 series cards like gangbusters, this very forum is testiment to that.

The accounts say it was. They aren't allowed to lie to their shareholders.

This bit;

GVS segment revenue increased 110 percent sequentially and
increased 96 percent year-over-year driven largely by our
semi-custom business. GPU revenue declined sequentially and
year-over-year.

Note that not only was the increase put on the semi-custom business (console APUs), but that GPU revenue "declined sequentially".

 

[layte]

Another way of phrasing that Nvidia excuse would be "we couldn't get our costs down to the level of AMD". In effect, AMD are able to make a profit at a price Nvidia couldn't (due, probably, to their CPU assets)

Or "Sony and Microsoft wanted to pay peanuts and it wasn't worth our time and effort". Given the economics of the console business I'd go with the razor margins reasoning over the belief of some AMD shareholders that it's a highly profitable game to be in.

NV were in the original Xbox and the engineering resources required meant they dropped the ball which AMD picked up and ran with. Then the situation was reversed with the 360 (the PS3 doest count as it was a last minute panic buy when Sony realised Cell wouldn't do everything they thought it would). Now AMD have put a bunch of resources behind the new consoles, will the cycle repeat? Another reason NV were wary about going for the business.

 

[layte]

The accounts say it was. They aren't allowed to lie to their shareholders.

This bit;

Note that not only was the increase put on the semi-custom business (console APUs), but that GPU revenue "declined sequentially".

Revenue =/= profits.

Obviously there will be big upfront injections of cash to design and develop the parts, but we will have to see how that translates into ongoing income. Didn't they have a similar bump into profitability when Intel paid up for being a bunch of dirty crooks a while ago?