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AMD beats earnings estimates thanks to console sales, but APU outlook is bleak

Gregster

Gregster

Gregster

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After Intel missed its earnings expectations last week and predicted that 2014 would be a flat year for the company, eyes have been watching Sunnyvale to see how AMD’s sales would break. Historically, Intel has been the bellwether of the semiconductor industry; a bad quarter for Intel typically means AMD is headed off a cliff. This time was different.

For Q4 2013, AMD reported income of $1.59 billion, up 9% from Q3 and 38% year-on-year. Total yearly sales were $5.3 billion (down 2% from the whole of 2012), but gross margins hit 37%, far higher than 2012′s 23%. This wasnt’ enough for AMD to return to full profitability — Sunnyvale still posted a loss of $83 million for the whole of 2013 — but a net income of $89 million in the fourth quarter and earnings per share of 0.12 both beat industry expectations.

The company’s strong sales and overall position are thanks to its surging graphics revenue from its console business and new Radeon sales. In fact, if this were focused solely on computing solutions, the story there is abysmal. Take a look at how AMD’s market shifted in 2013…

AMD 2013 Revenue

AMD’s graphics business surged just as the bottom fell out of APUs. Kaveri may help reverse this trend, depending on uptake, but that’s still unknown territory. AMD claims that adoption of Kaveri, Mullins, and Beema are all strong, but wasn’t ready to name partner names for future product shipments on the latter two parts. Kaveri should ship in desktop systems in the near future, with mobile Kaveri arriving later this year. Beema and Mullins will ship in the back half of the year, which is when we’ll see any gains in tablets and low-cost laptop segments.

This neatly captures both the success of AMD’s new strategy and the difficulty of holding on to that success if the APU business doesn’t start to recover. The bottom may have fallen out of the PC market as a whole, but AMD ate a far higher percentage of that decline than Intel did. According to AMD, the decline in APUs was driven by “decreased chipset and notebook unit shipments.” GPU revenues increased sequentially thanks to the launch of new R7 and the R9 produt families, but AMD doesn’t break out exactly how much ASPs or GPU shipments were up last quarter.

Finally, AMD will pay Global Foundries $250M in the first quarter of this year. as part of the 2014 WSA. It missed its wafer purchases in Q4 2013 (960M worth of wafers instead of $1.15B for the year), but did not incur a penalty for this shortfall.

Looking ahead to 2014

AMD’s 2014 roadmap shows a steep decline in Q1 of this year with sales dropping an estimated 16%. That’s a greater-than-typical seasonal decline; it reflects an increased drop-off on console sales as those products move out of Q4, combined with the normal seasonal decline in PC sales. Overall, AMD expects the PC space will decline in 2014, The company’s plans for the year as a whole won’t be surprising to anyone who follows it — the company believes it can derive as much as 50% of its revenue frm the non-PC space, it plans to launch ARM servers later in 2014, and it’s bullish on the ramp of its refined Kabini hardware.

AMD plans

Underneath the marketing there’s a message: AMD doesn’t want to just be a PC company anymore, and it’s well aware of the dangers of clinging to strongly to a semicustom business based solely on console parts. That’s why the focus in the semicustom space is built on pushing AMD hardware into new low power and embedded markets, and its why AMD wants to capitalize on its SeaMicro business with a new ARM part. That part will be ready to sample by the end of the quarter (AMD claims it has strong interest).

AMD CEO Rory Read did what he said he’d do. He’s returned AMD to profitability. With the PC market still in flux, it’s not clear if this will remain true, and we remain convinced that Steamroller is the wrong core for AMD’s long-term success — but we’ve got to give credit where credit is due. While AMD isn’t out of the woods at this juncture, it’s come a long way from 2012.

AMD’s stock has fallen some 10% since this earnings news broke — Wall Street evidently isn’t satisfied with these figures, despite strong growth, better-than-expected earnings, and a net income of $89M for the last quarter.
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I posted this in the Mantle thread but wasn't relevant so got ignored. You're a braver man than I posting it as it's own thread lol :D. If you stand outside and listen carefully you can hear DM typing :D
 
MjFrosty said:
I posted this in the Mantle thread but wasn't relevant so got ignored. You're a braver man than I posting it as it's own thread lol :D. If you stand outside and listen carefully you can hear DM typing :D
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It is good news for AMD....Not great news but Wall street don't mess about and shows what they think at the end of the article. AMD are pulling out of the red slowly though and this is needed for both AMD and nVidia fans, as competition is good for us.
 
Gregster said:
It is good news for AMD....Not great news but Wall street don't mess about and shows what they think at the end of the article. AMD are pulling out of the red slowly though and this is needed for both AMD and nVidia fans, as competition is good for us.
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Aye, can safely take away that they're on the right track now, and to come out as they have after what's clearly been a huge expenditure with multiple ventures into Mantle, hardware contracts and Hawaii can only be a good thing. It's more the article that points out the decline lol. Which is why I thought against posting lol.
 
Good stuff, even if wall street aren't happy. The ship is being steadied and will allow them to move forward.
 
MjFrosty said:
it's not all doom and gloom no, but a 16% drop in just over a month since Christmas isn't great news
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Why isn't it great news? You stockpile probably in the region of 6million chips to sell to MS/Sony at once for consoles to start being pumped out, the idea that you will continue to sell 6million every month is daft. It's natural and normal, 16% decline year on year would be bad, a 16% decline after a HUGE increase in the previous quarter is still a larger year on year increase.

You always expect a big product launch like new consoles, particularly when launched in the same quarter, to increase sales and to have a corresponding decrease afterwards.

You have to go out of your way to see that as bad news.

Going from losses to profit, is not a decline, increasing sales and revenue, is not a decline. The general trend is growth, increase profitability, drastically increased margins.

LIkewise, sales of APU's, or CPU's, or GPU's drop off when you know something else is coming. Beema/Mullins/Kaveri are drastic improvements on existing chips, existing chip sales drop as they gear up for releasing products with the new chip..... so you'd expect Richland, Kabini, Temash sales to decline fastish in Q1, drop like a bomb in Q2, and mobile Kaveri/Beema/Mullins sales to rocket in Q3/Q4.

Only companies that essentially don't change want quarter on quarter identical results, McDonalds or the like, no reason for a drop in sales for a particular quarter. Tech companies have high and low quarters, as do loads of other industries. Apple's quarters before a new iPhone launch and after will be very different, that is how it works. Intel/Nvidia have low/high quarters based on winding up old products or launching a new one.
 
I swear DM is some sort of AMD spokesperson... ;)

Anyway, I guess this is fairly good news for AMD - but the road ahead is swervy for them, they may have done well with the console deals but the major revenues from that are over for AMD and their future success relies on a lot of their recent innovations being a big success; which is, of course, never guaranteed in the technology industry.

But there's too many AMD news threads popping up if you ask me...
 
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Stone the crows, I could cry. Take it up with the journalism as they're the ones reporting it DM.

AMD’s 2014 roadmap shows a steep decline in Q1 of this year with sales dropping an estimated 16%. That’s a greater-than-typical seasonal decline; it reflects an increased drop-off on console sales as those products move out of Q4, combined with the normal seasonal decline in PC sales. Overall, AMD expects the PC space will decline in 2014
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Finally, AMD will pay Global Foundries $250M in the first quarter of this year. as part of the 2014 WSA. It missed its wafer purchases in Q4 2013 (960M worth of wafers instead of $1.15B for the year), but did not incur a penalty for this shortfall.
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You could literally start an argument in an empty house. How could there be ANYTHING bleak about the following statement. Dissect dissect disregard disregard.

On the face of it yes it's not a massive issue and things are on the up as I've already said above, but financially you can't deny it's obviously been a slog over the last few months. Nobody is saying your shares are in any danger DM, you can hold back the defence.
 
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Was it though?

Going from losses to profit, is not a decline, increasing sales and revenue, is not a decline.
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I guess a larger than average seasonal decline is apparently not a decline at all then. I'll give you something, it's not as argumentative as it is defensive...

There's being informative, and then there's trying to dissect a bleak quarter for a company when nobody is saying it's that bad in the first instance.

Just take it for what it is and move on.
 
PhysicsMan94 said:
I swear DM is some sort of AMD spokesperson... ;)
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Spokeswoman. DM is never concise :)

AMD haven't had a properly new product in ages, Kaveri is filtering out now but the important (profit) markets, server and notebook, still aren't being given any love. AM3+ is dead. Hawaii is nice, but it isn't setting the world alight in the price points that matter to most people either, rebrands abound.
 
MjFrosty said:
Was it though?



I guess a larger than average seasonal decline is apparently not a decline at all then. I'll give you something, it's not as argumentative as it is defensive...

There's being informative, and then there's trying to dissect a bleak quarter for a company when nobody is saying it's that bad in the first instance.

Just take it for what it is and move on.
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All PC sales are down by 15%.

Everyone in the PC industry have declining PC related sales, including Intel and Nvidia.

Now, in the face of that:
APUs increased 1%
Down 19% in notebooks
AMD's revenue is up by 10%
Profits are up by 100%
Discrete GPU sales are up

Compare that to

Nvidia:
Discrete GPU sales down 15%
mobile discrete shipments down 18%
Revenue is down.
Profits are down.


Intel:
Notebooks fell by 7%.
Desktop down 3%.
Revenue and profits are flat.

They are all struggling, the difference is AMD are the only ones with increasing Revenue and profits.

How is that bad?
 
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Is that even this quarter?!

When you factor in all the sales from Crypto currencies in GPU sales and console sales, they were always going to have a great final quarter and I'm sure they'll eventually reach their full year of profitability which I believe was there goal as of two years ago wasn't it?

MY comment, albeit originally a little in jest is that their current quarter is bleak. Which it is. That 16% reportedly scared 12% of investors to jump ship. Financially if 16% is 'nothing' in a slow quarter then why the big fuss. You're picking hairs if you're saying it isn't. Maybe some investors are a little concerned in how and when AMD will ever return a quarter as profitable as last years.
 
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Nvidia's profit margins

AMD's profit margins

nVidia over the last 5 years have an average profit of 5.73% whilst AMD over the last 5 years have -1.27% losses.

nVidia reported profits of 11.27% in Q4 of 2013, whilst AMD had profits in the same Q4 of 5.6%. A profit is good but the analysts are saying AMD are volatile and you can see why when you look at those charts.
 
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