Business, Hardware

AMD 1Q 2013 Earnings ? Still Losing Money, Albeit Less.

AMD today reported earnings for their first fiscal quarter of 2013, which saw losses of $146 million on $1.09 billion in revenue. AMD?s gross margin also grew 2% to 41% for 1Q 2013 over 4Q 2012.

AMD is a company that has been on the slow and steady route to rehabilitation. They have a new CEO and virtually a whole new executive team. Rory Read, AMD?s newest CEO, joined the company in August of 2011, and has since joining the company, tried to change the culture. However, Rory and the rest of the company really did not have much of a chance to take any risks or even execute strategy with Thomas Seifert as CFO. Until his departure in September of 2012, AMD seemed doomed and without a chance to come back from their position of irrelevance in the IT industry. Since September, however, AMD appears to have become more aggressive and willing to take more risks and actually challenge their competitors. While it remains to be seen what AMD is able to do with their APU architecture, there is no doubt that AMD?s GPU business has done a fantastic job of selling what amounts to ?old? hardware (see Radeon HD 7970). AMD has accomplished this as a result of their Never Settle and Never Settle Reloaded bundles, with the reloaded bundle delivering unparalleled value to consumers. They have also succeeded in obtaining the design wins for all three major consoles in graphics and two of the most important consoles? CPU.

Financially, these console design wins are likely to help AMD in the latter quarters of this year and assist them to likely return to profitability in the 4Q 2013. Looking at AMD?s business segments, their computing solutions business has suffered from reductions in revenue, which stem from overall reductions in PC shipments as well as loss of market share to Intel. However, AMD has reduced their losses in this business segment from $323 million in 4Q 2012, to $39 million in 1Q 2013. Much of this difference can be attributed to the charge due to Globalfoundries of $273 million. Even with that taken into account, AMD has still reduced their losses. They also managed to increase GPU sales by $11 million from $326 million in Q4 2012 to $337 million, however, this is still down from $382 million in 1Q 2012. As a result of other operating expenses, AMD posted an operating loss of $98 million.

One interesting fact in AMD?s restructuring is that in a single year they?ve managed to reduce their headcount from 11,265 to 9,844. Clearly the company is downsizing and we believe that the best time to see the results of their work will be in the 4Q 2013. In that quarter, we should seriously see whether AMD?s hard work and talent bleeding and reacquisition have worked to bring the company back to profitability and a position of relevance.

AMD expects the 2Q 2012 to be up sequentially in terms of revenue by 2% with a margin of error of 3%. We expect the next quarter to be a relatively slow one, but we do foresee AMD beginning to prepare to ramp their new CPUs and console design wins. We will see what their future APUs have to offer and whether or not they can finally introduce a product that is competitive in the mobile tablet market.