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AMD investors positive despite $20M quarterly loss

AMD investors positive despite $20M quarterly loss

AMD's Q1 2014 financial report shows a drop back into the red with a $20M loss, although investors seem bullish on the company's future.

AMD's most recent earnings report has investors impressed, with the company's stock price rising almost 12 per cent on news of $1.4 billion in sales - despite an overall loss of $20 million for the first quarter of its financial year.

AMD's quarterly earnings call this week announced $1.4 billion in revenue for Q1 2014, an impressive rise of 28 per cent year-on-year at a time when the global PC market is continuing to shrink - albeit slower than previously. While the quarter-on-quarter shrinkage of 12 per cent might seem like bad news, that's comparing heavier sales in the run-up to Christmas to the post-Christmas slump; a sequential dip at this time is always to be expected.

A gross profit margin of just 35 per cent, indicative of AMD's push towards the lower end of the market in CPUs and strong competition from rival Nvidia in GPUs, led to overall operating income of $49 million for the quarter; not enough, sadly, to prevent a loss of $20 million overall. With AMD ending the last quarter on an $89 million profit, that's a blow - although one significantly less strong than the whopping $146 million loss the company made in the same quarter last year.

'AMD continued our momentum by building on the solid foundation we set in the second half of 2013, further transforming the company,' claimed AMD president and chief executive Rory Read during the call with press, investors and analysts. 'Backed by our powerful x86 processor cores and hands-down best graphics experiences, we achieved 28 percent revenue growth from the year-ago quarter. We are well positioned to continue to grow profitably as we diversify our business and enable our customers to drive change and win.'

The company's results show that the PC market slump, while slowing, is continuing to have an impact: AMD's Computing Solutions business unit's revenue dropped eight per cent quarter-on-quarter and 12 per cent year-on-year, due to a drop in shipments. Its operating loss, however, was a mere $3 million; down from $7 million last quarter and a painful $39 million in the same quarter last year.

AMD's Graphics and Visual Solutions business unit is the most interesting story, however: a 15 per cent drop in sequential shipments has been more than offset by an impressive 118 per cent increase year-on-year, attributed to the company's deals to put semi-custom system-on-chip (SoC) processors in the Microsoft Xbox One and Sony PlayStation 4 consoles. Overall, the division made a $91 million profit for the year, down from $121 million last quarter when Microsoft and Sony purchased their console chips but up from just $16 million in the same quarter last year.

During the conference call, AMD's Lisa Su, general manager of global business units, confirmed that the company is still in the design stages of a new semiconductor process node. 'We are 28 [nanometre] this year, we have 20 nanometre in design, and then FinFET thereafter,' she claimed in response to an analyst query - suggesting that 20nm parts won't be available in quantity until 2015 at the earliest, with the 3D FinFET transistor move - designed to compete with Intel's Tri-Gate Transistor technology - likely to come the year after.

Su also had positive things to say about AMD's foray into the low-power server market with Cambridge-based ARM's IP. 'There's been a lot of customer interest around Seattle [chips], so certainly for the server guys, the hyper-scale guys and then even some adjacent markets, there's good customer interest, claimed Su. 'I'll say the interest in the platform is quite high and it's a major milestone for us to introduce our first 64-bit ARM chip into the market.'

'What we're doing here is identifying this opportunity long before it has taken place,' added Read, 'and we're catching it just as the way it is forming. That's the kind of innovation leadership that we really want to go after. This is going to be an important market over the next three, five years, and we have an opportunity to truly lead in this ARM server ecosystem, and take advantage of our ambidextrous capability. This is spot-on in the strategy.'

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