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AMD's losses mount as Read teases low-power plans

AMD's losses mount as Read teases low-power plans

AMD's Rory Read claims that he has a plan to return his company to profitability, but with a $1.18 billion loss for the year is it too little too late?

AMD's losses continue to mount, but the company has vowed changes that it hopes will mean a return to profitability by the end of the year.

That AMD would post a major loss this quarter is no surprise: everyone is suffering due to a downturn in the PC market, not helped by slow uptake for Microsoft's Windows 8 operating system. Even chip giant Intel is feeling the pinch, but whereas Intel can get away with losing a chunk from its not-inconsiderable bottom line that's not the case for AMD: a 32 per cent year-on-year dip in revenue, equivalent to nine per cent quarter-on-quarter, means a serious loss of $473 million - bringing the total for the 2012 financial year to a whopping $1.18 billion lost, equivalent to $1.60 per share.

Those are painful figures: while rival Intel saw earnings hit in a similar manner, the company still managed to post quarterly profits of $2.5 billion. In total, Intel finished the 2012 financial year with a profit of $11 billion based on a 58 per gross profit margin - noticeably higher than AMD's 23 per cent profit margin. It's numbers like these that remind us of the disparity between the two companies, and provide an explanation for AMD's apparent inability to compete with Intel on high-end desktop and laptop processors: when you're haemorrhaging cash at the rate of $1.18 billion a year, it's hard to find the funds for in-depth long-term research and development projects compared with a rival that earns more than your entire market cap every single quarter.

So, where next for the sinking microprocessor specialist? 'AMD continues to evolve our operating model and diversify our product portfolio with the changing PC environment,' claimed Rory Read, AMD's president and chief executive, in a conference call discussing the results. 'Innovation is the core of our long-term growth. The investments we are making in technology today are focused on leveraging our distinctive IP to drive growth in ultra low power client devices, semi-custom SoCs and dense servers. We expect to deliver differentiated and ground-breaking APUs to our customers in 2013 and remain focused on transforming our operating model to the business realities of today.'

Those business realities appear to include all-but abandoning the performance end of the market to Intel and its current-generation Ivy Bridge and next-generation Haswell processor families. Instead, as Read himself admits, AMD will be focusing on low-power products based around its heterogeneous systems architecture (HSA) concept - starting right now, with AMD hiring ARM licensee Qualcomm alumnus Charles Mater to head up its system-on-chip (SoC) division and Wayne Meretsky, formerly of Apple's Macintosh development team, to lead the software side of things.

It's not hard to see why AMD feels the need to hire some fresh blood: the company has previously announced plans to launch Opteron chips based on the 64-bit ARMv8 instruction set architecture by the end of next year. Designed for use in high-density server products developed by wholly-owned AMD subsidiary SeaMicro, the new Opterons would give AMD a fighting chance of winning market share from Intel in the lucrative cloud computing and micro-server markets.

While the ARM-based Opterons may be a year or more away, Read is still bullish about his company's future. 'We are executing a turnaround that will take several quarters. We expect continued choppiness in the PC market in the first half of 2013, and we will closely manage the business as we reset, restructure and ultimately transform AMD,' Read told press and analysts during the conference call. 'We have the right strategy and a new set of products coming to market in 2013. We continue to make the investments required to drive a larger percentage of our revenue in the high-growth adjacent markets: dense server, semi-custom, embedded and ultra-low power client markets.'

Read outlined a plan for the company that would see it return to much-needed profitability by the end of the year, including a reduction in operating costs - which almost certainly means redundancies in the near future - alongside branching out into new markets including embedded and mobile.

It's something the company desperately needs, but that investors appear confident Read can deliver: despite a small 0.41 per cent slip in the company's share price in the last day, after-hours trading has seen AMD regain 1.63 per cent - suggesting investors are willing to stick around to see if Read can change the company's fortunes.

10 Comments

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maverik-sg1 23rd January 2013, 11:15 Quote
How can companies keep posting losses and yet continue to trade? Appears to me that AMD did not plan beyond the Athlon64 and has been playing 'catch-up' ever since.....struggling with an identity of what they are or what they intend to be is also a factor here.

I hope they can remain a force to be reckoned with and that the next batch of CPU/APU/GPU products are more in line with peoples expectations.
cave_diver 23rd January 2013, 11:24 Quote
Some divisions of AMD *must* be doing well and profitable, otherwise investors would simply stop. Personally, I wouldn't invest in AMD, the epic losses and being continuous as well says to me that this company is doing something wrong.

It's a catch-22 though, Intel need competition for them to keep pushing onwards, is it me, or are intel prices creeping upwards? That could just be because I have about £10 a month budget to spend on PC upgrades so maybe the prices just feel bad to me!

And Intel won't feel pressured by ARM in anywhere other than the mobile market (unless ARM have mastered servers of 100's of ARM CPU chips?)
runadumb 23rd January 2013, 11:39 Quote
This is why I really don't understand the rumours that both Microsoft and Sony will be using AMD exclusively for their next consoles. AMD has been hurting for some time so it isn't shock news and putting all your eggs in a basket with no bottom is madness. yet the rumours persist.

I recently bought my first AMD chip since the Athlon x2 for a HTPC due to the better iGPU they offer over Intel. So I believe they have some design wins right now but Haswell may bury them.
MrGumby 23rd January 2013, 12:05 Quote
What i want to know is where this leaves their graphics division? I say this because that was always a concern for me when they purchased ATI. Even tho their graphics cards are strong competition to Nvidia huge losses for the rest of the company could hurt investment in new graphics, unless money for that is ring fenced.
Platinum 23rd January 2013, 13:02 Quote
I wonder if that plan is the Next Gen consoles? Rumours are that the Xbox and PS4 will both have 8 core AMD CPU's and AMD GPU's?
Snips 23rd January 2013, 13:27 Quote
Losses always sound bad year on year with AMD and this new number is a shocker. However, it's assets are keeping it a float no doubt and they have brought on board executives who have done well elsewhere. I know that's no guarantee of success and future realises sound ok but it will be brown trouser times until they release. With it's share price so low and staying that way, I see it as a huge target for someone to takeover
towelie 23rd January 2013, 14:03 Quote
I think they'll still be around for a long time yet, rumors as mentioned above that the xbox has an AMD chip in it which will be a massive finical gain for them.That and the fact alot of people are buying up there 7x series.
Not doing great in the Desktop market but still see lots in the servers world.
CAT-THE-FIFTH 23rd January 2013, 16:48 Quote
AMD losses detailed:

http://www.theregister.co.uk/2013/01/22/amd_q4_2012_financial_results/

http://www.theregister.co.uk/2013/01/23/amd_seeks_profitability_by_end_of_this_year/

Losses were actually below what analysts had predicted,margins have increased somewhat and share price actually has increased slightly:

http://www.forbes.com/sites/ericsavitz/2013/01/22/amd-q4-loss-smaller-than-expected-shares-inch-higher/

It seems the major component of the loss is actually due to their agreement with Global Foundries regarding wafers. Outside that they actual made lower losses than in the previous quarter. It really seems Global Foundries is more or less a big problem for AMD with their excessive charges!! :(

However,at least one good thing has emerged - nearly one third of all notebooks sold in Q4 2012 in the US used AMD CPUs!
NethLyn 23rd January 2013, 22:40 Quote
All great news Cat-The-Fifth, the question would be what to buy to help the firm, as my old build's beginning to give me crashes and I could pull forward this new build.

If I buy a Radeon that's money for AMD but it's all about the margin, if I choose an old CPU over one of the Bulldozers for example. With Intel they don't seem to care what you buy even if they have brand new all singing-all dancing chips for hundreds of pounds, you buy a Pentium or anything in the budget line, it's still a sale.
rollo 24th January 2013, 11:10 Quote
People console hardware is sold on licence.

AMD was in 2 of 3 consoles in the current gen.

It makes 20mil a year from Microsoft and less than that from Nintendo.

It's not going to make them break even any time soon.

The basics are this

AMD has 1bil in cash
AMD has 2bil in debt
AMD margins are at 15% that's about 20% below break even.
Intel now has 89% of the server market.

If they lose 1bil this year they lost 1.3 bil last year they will be bankrupt by dec 2013.

Gpu devision posted a profit of only 113mil for the year.

AMD need a miricle to survive the next year ( or a rescue by apple / Samsung for there Gpu patents which would still result in no more AMD CPUs)
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