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

[cheesyboy]

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.

There are reasons beyond the contracts themselves that AMD were happy to get into the consoles - the expansion opportunity for their semi-custom initiative, for example. Nvidia didn't have the eco-system in place for such an opportunity.

Even disregarding that, though, they are still demonstrably making good returns on the consoles. I'm not sure why you are continuing to ignore the facts in favour of conjecture based upon Nvidia's downplaying of missing out (or withdrawing from bidding) on a big contract

 

[cheesyboy]

Revenue =/= profits.

No, but profits = profits

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.

Note the $79 increase in profit from one quarter to the next, coinciding with the increased revenue. I've already given you this analysis.

 

[~>Dg<~]

No trolling, considering how horrible some ports were current gen (GTA 4 I'm looking at you), having the majority of games built with AMD technology is a big game-changer. nVidia will likely still be the big player on PC, but it won't be so one-sided moving forward.

Of course pc-exclusive games are exempt, but the major companies will be on all 3 platforms, so unless nVidia whores physX to everything under the sun I can see the tides changing.

wont make any difference. things will continue as normal. what will continue to happen is consoles will grab more of the gaming market share and pc gaming will continue to shrink as it has been doing since consoles launched.

 

[layte]

There are reasons beyond the contracts themselves that AMD were happy to get into the consoles - the expansion opportunity for their semi-custom initiative, for example. Nvidia didn't have the eco-system in place for such an opportunity.

Even disregarding that, though, they are still demonstrably making good returns on the consoles. I'm not sure why you are continuing to ignore the facts in favour of conjecture based upon Nvidia's downplaying of missing out (or withdrawing from bidding) on a big contract

We don't know if it's one off revenue bumps due to R&D yet. Historically console suppliers have made very little from the business, I don't see that suddenly changing. Lets park this until we have further financial results to chew on, see if the ongoing revenue from console parts keeps everything buoyant like you think it will.

 

[cheesyboy]

We don't know if it's one off revenue bumps due to R&D yet. Historically console suppliers have made very little from the business, I don't see that suddenly changing. Lets park this until we have further financial results to chew on, see if the ongoing revenue from console parts keeps everything buoyant like you think it will.

We do know that it's largely down to the semi-custom business, because the financial statements released to the stockmarket tell us so. R&D movements don't go in to revenue.

 

[layte]

And where does payment from third parties for upfront costs go?

 

[cheesyboy]

And where does payment from third parties for upfront costs go?

Creditors

(i.e. not into income)

And if such a payment was a downpayment on stock (rather than a loan to be repaid), the income would be released piecemeal as parts are supplied. It would be illegal to manipulate this into income unduly, and someone from AMD would go to jail.

 

[CAT-THE-FIFTH]

There are reasons beyond the contracts themselves that AMD were happy to get into the consoles - the expansion opportunity for their semi-custom initiative, for example. Nvidia didn't have the eco-system in place for such an opportunity.

Even disregarding that, though, they are still demonstrably making good returns on the consoles. I'm not sure why you are continuing to ignore the facts in favour of conjecture based upon Nvidia's downplaying of missing out (or withdrawing from bidding) on a big contract

People also forget,that the console parts had all their R and D paid for by Sony and MS,and AMD does not need to incur many other costs such as marketing,rebates,etc with the parts. The risk is far lower as normally you would need to spend existing money or borrow some to develope new products,which you hopefully expect to get a return on. In this case large firms shouldered this risk.

The gross margins and net margins of the parts are going to be more or less the same.

Also,the desperate need for consoles to fail by some posters also,seems weird. Consoles are not going anywhere.

 

[Suarez7]

People also forget,that the console parts had all their R and D paid for by Sony and MS,and AMD does not need to incur many other costs such as marketing,rebates,etc with the parts.

The gross margins and net margins of the parts are going to be more or less the same.

Also,the desperate need for consoles to fail by some posters also,seems weird. Consoles are not going anywhere.

I don't want consoles to fail, in fact I'll be buying one on release. Still undecided with the latest PS4 delays in Watch Dogs and Drive Club. Without consoles there wouldn't be half as many games on PC's. Hopefully porting is easier but as someone previously said why would MS or Sony want their games optimized for another system than the one they mainly want the game to sell on. Hopefully the new API's and what not make optimizations go hand in hand and don't require massive tweaking to get right.

 

[FuF]

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.....

If that is really the case nVidia has only itself to blame for finding itself in this position. Fair enough PC market can keep them afloat but it is becoming more and more niche market.

In so far as AMD doing well, good on them! I can honestly say I have always used Intel + nVidia, but market competition is essential to drive the progress. Both Intel's advancement and nVidia's prices leave much to be desired.

 

[LtMatt]

I don't want consoles to fail, in fact I'll be buying one on release. Still undecided with the latest PS4 delays in Watch Dogs and Drive Club. Without consoles there wouldn't be half as many games on PC's. Hopefully porting is easier but as someone previously said why would MS or Sony want their games optimized for another system than the one they mainly want the game to sell on. Hopefully the new API's and what not make optimizations go hand in hand and don't require massive tweaking to get right.

Get a PS4 dude, has a better AMD gpu in it than the xbox one.

 

[CAT-THE-FIFTH]

People also need to consider another aspect. The consoles are effective advertising for the AMD semi-custom unit too. Sony and MS have spent billions of dollars on the consoles,and it is a good sign of faith in AMD,and serves as unofficial marketing for them. If you even look at CPUs like Brazos and Jaguar,they are designs which were made with smaller than average teams,and highly modular.

This means lower R and D spend,easier modification and a quicker time to market. Many industries do this kind of modular building. Look at our new aircraft carriers,which were built in blocks at different shipyards.

Jaguar for example is designed to be process node portable,ie,it only needs changes to a some IP blocks if you want to make it at different companies.

It also appears AMD is going to make some key changes next year,ie,things like Hypertransport will be replaced for example. AMD is introducing its first ARM based products in the next year and these use the new 64 bit cores too.

 

[layte]

Creditors

(i.e. not into income)

And if such a payment was a downpayment on stock (rather than a loan to be repaid), the income would be released piecemeal as parts are supplied. It would be illegal to manipulate this into income unduly, and someone from AMD would go to jail.

It's not just that though is it. It's payment for services, design work and a couple of million of chips ready for launch. AMD will be getting a lot of money due to the release of a new console being so massively front loaded, I'm happy to wait and see if the increased revenue numbers carry forward, but I get the suspicion they will drop back down once the launch window is over and all they are doing is supplying regular shipments of chips.

 

[humbug]

I am glad to see AMD doing well, I would be interested to see their margins on consoles and GPU's. I can see the CPU's dragging profit away from AMD because in honesty, they are shoddy compared to Intel.

Nobody but nobody should want an Nvidia monopoly and the same for AMD, we need both to be fighting it out.

                                    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

On Computing Solutions AMD made $790m in sales, after all costs they made $22m in taxable profit from that.

On Graphics and Visual (GPU's, APU's and those Game Consoles) they made $671m in sales, of which $79m was taxable profit.

 

[andybird123]

wont make any difference. things will continue as normal. what will continue to happen is consoles will grab more of the gaming market share and pc gaming will continue to shrink as it has been doing since consoles launched.

oh really?

A report commissioned by the PC Gaming Alliance indicates that PC software sales hit a record $20 billion worldwide last year.

That figure represents growth of 8 per cent year-on-year, and 90 per cent since the first PC Gaming Alliance report in 2008.

The report suggests that there are now 1 billion PC gamers worldwide, around a quarter of which can be identified as "core" players interested in traditional genres like strategy, action and role-playing games. The global PC software industry is expected to grow to $25.7 billion in sales by 2016.

 

[4T5]

I'm glad about this as this is one of the few companys I have a soft spot for. No real reason apart from the cards I bought back in the day.

 

[FrankJH]

They aren't a gold mine at all. It took MS and Sony a couple of years to make profit from the current gen consoles. Also the parts used in the consoles are worth very little so the profit margins will be tiny. nvidia probably realised it wasn't worth going for again and turned their focus to PC.

Surely you are comparing inhouse design vs customer design though (which will have completely different cost ratios)

Im not disputing MS and Sony both took a lot of time to get back into profit after each generation - but as they surely must have BOTH paid AMD a significant sum to use their parts, and given that they are only updated varients on what AMD were already doing (ie its not totally new tech, just updated for last year's effectively) I dont think its directly comparable.

It was a BIG loss for nvidia not to be in either - dont fool yourself to think anything else

 

[~>Dg<~]

oh really?

actually pc desktops have been declining for years and continue to do so.

Since launch Windows 8 has failed to ignite the PC industry which just recorded its sixth straight quarter of negative growth, with research firm Gartner predicting that slump is likely to continue into 2014.


pc desktops are declining in sales consoles will grow more .

why do you think win8 was aimed at tablets and such ? because future is mobile not desktops !

 

[Suarez7]

It was a BIG loss for nvidia not to be in either - dont fool yourself to think anything else

nvidia don't miss massive money making opportunities.

I'm willing to bet the revenues made from console parts is tiny in the big scheme of things. They sell cards worth the price of a console in the millions. The AMD parts we're looking at in the consoles probably aren't even worth £100, considering the PS4 sells for £350.

 

[555BUK]

pc desktops are declining in sales consoles will grow more .

Technically, console sales within Europe and the US have dropped faster than PC sales during the past 5 years. Tablets and smartphones have provided consumers with easy access to web browsing and cheap games. Consoles are not solely responsible for taking over the PC world, Tablets, smartphones and smart TV's are equally taking over the console world.

Unless the PS4 & XBOX One offer something truly new over older consoles, console sales will drop further in coming years. There may be a brief resurgence in the coming months due to both Sony and Microsoft releasing new shiny things, but that novelty may soon wear off. £50 for a console game vs 69p for an iPad/Android App is stiff competition, and apart from improved graphics there is little than PS4's and One's can provide over PS3's and 360's.

PC and console popularity is fading fast because kids have more things to play with nowadays.