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AMD hits its targets thanks to console APU deals

AMD hits its targets thanks to console APU deals

AMD's Rory Read has presided over a serious turn-around in the company's fortunes, thanks largely to its deals with Sony and Microsoft on their respective games consoles.

AMD's quarterly financial results are in, and the company has hit its targets thanks largely to the strong sales of the Xbox One and PS4 consoles for which it supplies the semi-custom accelerated processing units (APUs.)

The two major design wins for AMD have helped the company beat its earnings forecast for the quarter with revenue of $1.59 billion - up 9 per cent compared to the quarter previous and a healthy 38 per cent compared to the same quarter last year. A gross profit margin of 35 per cent - considerably lower than rival Intel's, it must be noted - means a net income for the quarter of $89 million, a considerable improvement over its previous loss-making quarters.

'Strong execution of our strategic transformation plan drove significant revenue growth and improved profitability in the fourth quarter,' claimed Rory Read, AMD president and chief executive, during the company's earnings call. 'The continued ramp of our semi-custom SoCs and leadership graphics products resulted in a 38 per cent revenue increase from the year ago quarter. Our focus in 2014 is to deliver revenue growth and profitability for the full year by leveraging our differentiated IP to drive success in our targeted new markets and core businesses.'

The bumper quarter, sadly, wasn't quite enough to turn around the company's annual financials: for the year just ended, AMD hit revenue of $5.3 billion for a two per cent year-on-year decline - not bad when the traditional PC market is at its lowest point for years - but low margins of 37 per cent combined with a high operation cost led to an overall net loss of $83 million for the year.

The winners and losers for the quarter are unsurprising: the company's Computing Solutions division saw its revenue drop 13 per cent year-on-year thanks to a decrease in chipset and laptop unit shipments, leading to a $7 million loss - a dramatic shift from the $22 million income it made the quarter prior, but still higher than the division's staggering $323 million loss in Q4 2012. The Graphics and Visual Solutions division, which includes the semi-custom APUs found in Microsoft and Sony's latest consoles, saw the opposite: strong sales of both consoles led to a bumper $121 million operating income for the quarter, up from $22 million in Q4 2012.

As for the future, AMD will clearly be hoping that its latest Kaveri APUs will be riding high on the hopefully-recovering PC market. Combined with continuing sales of AMD-powered consoles and plans to launch a family of server-oriented 64-bit ARM processors by the end of the year, AMD is predicting a good year ahead. Investors, however, are less convinced: in pre-market trading, the company's shares dropped a massive 11.51 per cent to $3.69.

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AlienwareAndy 22nd January 2014, 13:06 Quote
Well it's a bit more cheerful than some of their press lately :)

Good on em.
Snips 22nd January 2014, 15:03 Quote
"the company's shares dropped a massive 11.51 per cent to $3.69." - Ouch! especially if you have held them since 2000 :(
SexyHyde 22nd January 2014, 16:22 Quote
I'd say a good time to buy AMD shares. That is a massive turnaround financially and only really comes from the early uptake of consoles. This should be a good sign that the next two years will be good when the majority of people upgrade their consoles. The share price drop is obviously people who were expecting a bigger jump and quick price bump.
Snips 22nd January 2014, 16:37 Quote
I'm not so sure about that. The main reason for the renewed downturn in share price was the downcast of Q1 results as the peek last quarter was pre holiday/Christmas sales.
SchizoFrog 22nd January 2014, 16:41 Quote
Maybe I am mistaken but didn't they agree to sell and lease back substantial real estate assets in Texas back in March for over $150m cash? If so, aren't those extra funds helping to gloss over their issues? Especially as they still made yet another annual loss, a loss of over $87m. Maybe that also accounts for the ever decreasing share prices, I mean, how much more do they have to sell?
SexyHyde 22nd January 2014, 17:09 Quote
I'm not a console user but from what I've seen most people are sticking to 360/ps3 with the intention of upgrading over the next year or two. irl I know of only three people that have taken the plunge yet. The high price of the consoles in the current economic climate mean people will be upgrading later if/when they can afford it as opposed to splashing out at christmas like previously was the case. Also the lack of PS4's in the shops has stopped a lot of people getting that particular console. I've seen plenty of XBones though.
Syphadeus 22nd January 2014, 17:38 Quote
SexyHyde - the numbers don't support your observations. Stock of both the X1 and PS4 has been plentiful compared to previous console launches, the consoles have launched at a lower price than the last generation and the sales of the consoles within their launch window prove that there is a massive interest and uptake. We're talking around 7.5 million consoles sold since their launch, figures that took the 360 and PS3 much longer to achieve due to higher price and low stock availability. You "knowing in real life" just a few people who have a new console does not bear any significance in relation to how many have been sold. It could just mean all your friends are broke.
SexyHyde 22nd January 2014, 18:21 Quote
Stock of PS4 in my area has been snapped up straight away. I have not seen any units available for sale. A lot of the people I know irl are waiting to see what everyone else is buying. Of the three people I know that have upgraded, two have switched from 360s to PS4 this is more of an issue now online is a big feature and wasn't relevant with previous console releases. People are holding off so they can play with their friends. Also as you can get COD on the 360/PS3 the majority of people can stick with their old console. So you have to take the differing market conditions into account. Also console use is more mainstream now, with more casual gamers. So a growth would be expected, there is more people in the pool now.
SlowMotionSuicide 22nd January 2014, 18:26 Quote
Quote:
Originally Posted by Syphadeus
You "knowing in real life" just a few people who have a new console does not bear any significance in relation to how many have been sold. It could just mean all your friends are broke.

Or, you know, just plain uninterested.

I'm really not seeing massive excitement over the latest generation of consoles. Also, it seems most games are still made for PS3/XBOX360 too, so there's precious little incentive to get a new one.
Panos 22nd January 2014, 18:57 Quote
Hopefully AMD turns to a healthy profitability, or else we are doomed.
Intel & Nvidia going to charge the Moon if AMD goes down.

As for PS4 stocks. In Denmark, whole country, there were only allocated 2,000 PS4 for December. So quite a few colleagues from there, popped over to UK by ship, filled their cars and went back home. All the units were for friends, families and Christmas presents. While in UK they were 30% cheaper.
rollo 22nd January 2014, 19:02 Quote
Your correct in essence about the asset stripping that they have done this passed year to keep those numbers within reason. That + Q1 been poor estimates is the reason for the drop in share price. Shares have rarely been above $4 though so 11% may sound like alot but its about 40 cent that its dropped.

There net loss without those asset stripping would of been alot higher around the $300 million mark.

Also the fact that Jan - March is always a poor time for tech companies no matter who you are. Sales are always poor after christmas period.

AMD in profit is a good thing though if it lasts.

In the UK at least Ps4 is basically sold out, Certain shops do have stock in but they go fast. Xbox one is more available. Both are not sold just as consoles though, Both getting sold in bundles with games and stuff. Ps4 price is like £540 for the cheapest package ive seen one for sale in, Xbox one is closer to £600 mark.

Niether is at the stage where you can walk into game and come back out with just the console.

Marketing conditions? Ps4 is the fastest selling console of all time, If it continues at its current rate it could even beat the Ps2s records from years back. Playing with friends online is an issue for the younger consumer I guess, But the older consumer is unlikely delaying there purchase so they can play fifa14 with a work colleague.

Lack of game selection on both is the only reason ive not brought one yet.
Sheiken 22nd January 2014, 19:40 Quote
I like to think that I am partly resposible for this, considering I recently bought a ps4 and a kavery cpu! You're welcome AMD!
SchizoFrog 22nd January 2014, 19:45 Quote
I can't speak for retailers as I haven't been in one in ages but Amazon has PS4's for sale and in stock with Killzone - SF or Knack bundles from them direct for £385 and stand alone consoles are available to order now for a Jan 30th send out for £349. Sure some of the other bundles are sold out but if you really want one they are there now.
They also have XBox One's stand alone consoles available for £429 or with FIFA 14 for £449.
Snips 22nd January 2014, 21:48 Quote
Advanced Micro Devices Inc shares fell 11 percent in early trading after the chipmaker forecast a steeper-than-expected fall in quarterly revenue, prompting at least two brokerages to cut their price targets on its stock.

Weak PC sales, tough competition from Intel Corp and a drop in revenue from gaming consoles after a strong holiday season were responsible for the weak forecast, analysts said.

Canaccord Genuity cut its price target to $5 from $6, while FBR Capital Markets lowered its by 50 cents to $5.50.

Shares of AMD, whose processors are used in Microsoft Corp's and Sony Corp's latest game consoles, were trading at $3.74 on the New York Stock Exchange.

"Once again AMD has dashed the hopes of the believers," Bernstein Research analyst Stacy Rasgon wrote in a report.

"The quarter's results again reiterated serious concerns over the health of AMD's core PC business, which appears to be collapsing."

This is not a bad quarter from a numbers perspective but as an investor, one has to wonder what's next. If the company can only generate $0.06 of earnings in a quarter when both Microsoft and Sony launched next generation platforms, what levers can the management pull when favorable market winds are no longer behind the company? Unless something drastic changes, this may be as good as it gets.

Two key issues arose in the question and answer session on the earnings call: 1) management guiding cash balances lower and 2) the CEO running away from a question about an additional leg down for the gross margins. The first issue is bad. A lower cash balance is never a good thing, especially in a capital intensive industry. Suggesting that it would be lower in the first quarter would not have been good but stating that it is in the company's best interest to "target cash levels in the $1 billion range" which implies $200 million down from current levels is downright bad. Sadly, the second issue is even worse. By leaving the door open to more margin erosion, professional investors will take a wait and see attitude.

Despite printing decent quarterly results, a look behind the numbers makes AMD a wait and see company. Until there are indications that revenue can grow after the console cycle and margins will stabilize, its likely that this stock will remain in the penalty box.
SAimNE 22nd January 2014, 22:23 Quote
Quote:
Originally Posted by Snips
"the company's shares dropped a massive 11.51 per cent to $3.69." - Ouch! especially if you have held them since 2000 :(
my it teacher told me he bought in a little over 10 years ago..... i believe i could see behind his eyes the seething anger of a man willing to murder ceos in cold blood xD
Syphadeus 22nd January 2014, 22:24 Quote
Quote:
Originally Posted by SexyHyde
Stock of PS4 in my area has been snapped up straight away. I have not seen any units available for sale. A lot of the people I know irl are waiting to see what everyone else is buying. Of the three people I know that have upgraded, two have switched from 360s to PS4 this is more of an issue now online is a big feature and wasn't relevant with previous console releases. People are holding off so they can play with their friends. Also as you can get COD on the 360/PS3 the majority of people can stick with their old console. So you have to take the differing market conditions into account. Also console use is more mainstream now, with more casual gamers. So a growth would be expected, there is more people in the pool now.

Stock will become available again at the end of January in numbers. This is not the sort of shortage we saw with the previous gen consoles, Sony and MS are manufacturing 1+ Million consoles a month each, a number that is unprecedented for both of them. The fact that you still can't get them in the stores is evidence that there are consumers who aren't on the fence about buying them, who aren't taking a wait an see approach.

There is a general sense of apathy, I for one have a PS4 from UK launch but haven't played anything beside Killzone on it, and that's very pretty but it's generic. I doubt though that the price is going to get slashed when they're still selling out and I've only to wait until March until we start seeing interesting stuff.

I just generally don't agree with your sentiment that people are being more cautious about buying because of the economic climate or the importance of online. The things are selling in record numbers, and their release marks the end of one of the longest hardware cycles ever; people are ready to buy a new console and that is quite simply what is been borne out by the sales figures.
SexyHyde 23rd January 2014, 01:13 Quote
Quote:
Originally Posted by Syphadeus
Stock will become available again at the end of January in numbers. This is not the sort of shortage we saw with the previous gen consoles, Sony and MS are manufacturing 1+ Million consoles a month each, a number that is unprecedented for both of them. The fact that you still can't get them in the stores is evidence that there are consumers who aren't on the fence about buying them, who aren't taking a wait an see approach.

I've seen XBones in loads of stores available to buy any way you please. PS4 is just unavailable in stores it goes out as soon as it comes in. This is evidenced with the latest sales figures of PS4 @ 4.2m and XBone @ 3m.

My evidence of people sitting on the fence is talking to people that have expressly told me they are waiting, either to see what their friends get or just waiting for a larger portfolio of games. I've noticed a large portion of 360 users interested in switching to a PS4, this has the issue of leaving friends you game with behind if they too don't cross platform. I had this conversation with the two people that swapped platforms and a handful that are sticking with the 360 for a few months at least. Oh the fact that the PS4 hasn't released with all features (which will be available later in updates - possibly) is another reason I've heard for people sitting on the fence. Mandatory Kinect with XBone and the snoopy camera and always on mic - i've heard that too. The fact that the XBone isn't 1080p i've heard that mentioned. I'm a sociable guy all of this I heard irl from a varied bunch of folks, not on the web in any geek centric site.

Quote:
Originally Posted by Syphadeus
I just generally don't agree with your sentiment that people are being more cautious about buying because of the economic climate or the importance of online. The things are selling in record numbers, and their release marks the end of one of the longest hardware cycles ever; people are ready to buy a new console and that is quite simply what is been borne out by the sales figures.

I'll agree it is a massive hardware cycle. I'll agree people want a new console. BUT, I'll point to the fact that the economic climate we are in means more people have less disposable income than before and where in the past may have just got it on impulse will wait until they DEFINITELY want it. I can't remember people talking about similar issues I mentioned above with previous consoles. The only thing I can remember people using as a hold off excuse before was waiting for a game release.
Bindibadgi 23rd January 2014, 02:51 Quote
For investors wondering: AMD stated its future in the earnings call. Within the next two years it expects 50% of its income will be dedicated to custom semi-con. Other focus areas will be 64-bit ARM server chips.

So, assuming the company doesn't go on a hiring splurge, that's less time and energy into PC derivatives.
DbD 23rd January 2014, 10:24 Quote
Quote:
Originally Posted by SexyHyde
I'd say a good time to buy AMD shares. That is a massive turnaround financially and only really comes from the early uptake of consoles. This should be a good sign that the next two years will be good when the majority of people upgrade their consoles. The share price drop is obviously people who were expecting a bigger jump and quick price bump.

The problem is that AMD without consoles shrunk quite a bit last year. CPU sales were 25% down, this was hidden by all those console sales so AMD came out about even. Now console sales are going to remain steady, but they are not a way of growing the company. Investors aren't sure how they are going to do it. They say 50% of income from "custom semi-con" but since the consoles what "custom semi-con" deals have AMD announced that are going to provide all this income?
Bindibadgi 23rd January 2014, 10:42 Quote
Quote:
Originally Posted by DbD
The problem is that AMD without consoles shrunk quite a bit last year. CPU sales were 25% down, this was hidden by all those console sales so AMD came out about even. Now console sales are going to remain steady, but they are not a way of growing the company. Investors aren't sure how they are going to do it. They say 50% of income from "custom semi-con" but since the consoles what "custom semi-con" deals have AMD announced that are going to provide all this income?

Servers. The next big thing in server is custom server products that are totally tailor made for clients workloads, rather than buying off the shelf.

CPU sales dropping 25% is exactly what AMD fans need to understand: the investment for themselves and partners to commit is just getting less and less attractive as ROI risk increases.
rollo 23rd January 2014, 12:13 Quote
Sounds like its happy to be a APU / GPU seller for its future. Does remove any intrest from enthusaists though. Will the fx8300 series be the last of the mid to high end chips that we see from them you wonder.

As ive said in other topics AMD are not really in Retail anymore, If you go into pc world its all intel based pcs, Similar story on Dells website, Lenova sell 2 AMD pcs with older chips in them. HP do a few laptops but no desktops.

They have suffered in the retail sector in recent years where id think there APUs would make a decent cheap pc ( Sub £400 market that some companies aim for ) without that market cap to aim for there cpu sales will likely continue to drop off.

The amount of people who own a AMD chip is getting less and less on these sorts of forums, Where the average build is all Intel chips these days. Thats a problem if your not selling to retail as you are reliant on enthusaists to be intrested and buy your chips.
Bindibadgi 23rd January 2014, 13:58 Quote
Quote:
Originally Posted by rollo
Sounds like its happy to be a APU / GPU seller for its future. Does remove any intrest from enthusaists though. Will the fx8300 series be the last of the mid to high end chips that we see from them you wonder.

We're just about to get new roadmaps for 2014 and it's the first question I'm gonna ask since it's relevant to ROG.

ROG has a lot of AMD fans we'd effectively loose (since they'd rather never upgrade than buy an Intel rig) and I really hope so because it gets boring going "Hey, buy this, uh, Intel motherboard, again, and only one of 3 CPUs to do overclocking...".
Xir 23rd January 2014, 21:18 Quote
Quote:
Originally Posted by Snips
"the company's shares dropped a massive 11.51 per cent to $3.69." - Ouch! especially if you have held them since 2000 :(

considering the Euro-to-Dollar conversion rate back then, it's even worse..., and yes, I have some :(
Been witing for them to jump over the 4€ mark for quite some time now, and I thought that was cheap.
Quote:
Originally Posted by Bindibadgi
Servers. The next big thing in server is custom server products that are totally tailor made for clients workloads, rather than buying off the shelf.

Yup, consumer CPU's aren't where the money is.
SexyHyde 24th January 2014, 01:14 Quote
There are a lot of butthurt AMD fanboi's, but the way I see it is AMD have looked to the future and took long term steps. The enthusiast CPU market is just too small and expensive for them. The APU will rise strong, most people are getting by with their old computers because they have moved over to smartphone and tablet use - but will we really want to go PC free? Plus the tech in the AMD chips mean performance should only improve over time.

I just need someone to make an APU TV that can double as a Steam Box.
AlienwareAndy 24th January 2014, 01:17 Quote
Quote:
Originally Posted by Bindibadgi
We're just about to get new roadmaps for 2014 and it's the first question I'm gonna ask since it's relevant to ROG.

ROG has a lot of AMD fans we'd effectively loose (since they'd rather never upgrade than buy an Intel rig) and I really hope so because it gets boring going "Hey, buy this, uh, Intel motherboard, again, and only one of 3 CPUs to do overclocking...".

We love you too :)

Not that I'd never return to Intel but right now I'm having way too much fun with this PD chip. I've even installed some extra buttons to make it easier to recover when things go bad. Couldn't do that with **** boards so thanks for keeping us in mind and offering some decent products for us AMD users.

Now give us an ITX board.... :D
Bindibadgi 24th January 2014, 04:08 Quote
Quote:
Originally Posted by AlienwareAndy
We love you too :)

Not that I'd never return to Intel but right now I'm having way too much fun with this PD chip. I've even installed some extra buttons to make it easier to recover when things go bad. Couldn't do that with **** boards so thanks for keeping us in mind and offering some decent products for us AMD users.

Now give us an ITX board.... :D

Just ask for an ATX one first ;) Once you have that commitment at least then you can ask ITX! The problem is ITX use is still virtually non-existent outside NA/EU.
SexyHyde 24th January 2014, 04:56 Quote
Quote:
Originally Posted by Bindibadgi
Just ask for an ATX one first ;) Once you have that commitment at least then you can ask ITX! The problem is ITX use is still virtually non-existent outside NA/EU.

could it be
"use is still virtually non-existent" = "availability is virtually non-existent"
AlienwareAndy 24th January 2014, 18:07 Quote
Quote:
Originally Posted by Bindibadgi
Just ask for an ATX one first ;) Once you have that commitment at least then you can ask ITX! The problem is ITX use is still virtually non-existent outside NA/EU.

My Crosshair is the finest board I've ever had. Just stunning. I liked my CH III F too, the only thing that buggered it was the fact it was Nforce.

What I'd like to see now is AM3+ ITX. Even if it's only 4+2 and can only do 4.2ghz or so. I'd dearly like to downsize my lady's PC as she never uses it and it's just sitting there. Thus, being smaller would make it less apparent.. Bloody huge great hulk of a PC :D
Harlequin 24th January 2014, 18:17 Quote
AMD making a new chipset would be nice *cough* 1090FX*cough*
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