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

January 23, 2013 // 10:47 a.m.

Tags: #amd #arm #financial #fy-2012 #intel #opteron #q4-2012 #rory-read #seamicro

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.
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