The AMD Execution Thread [2007 - 2017]

[UniversalTruth]

AMD has IMO one of the best product stacks in their history plus a competitive advantage in GPU business, yet they made a loss. How?

It doesn't seem people think in the same way and the proof is:

Graphics segment revenue was flat sequentially and decreased 7 percent
year-over-year.
The year-over-year decrease was primarily driven by lower demand for desktop and mobile
graphics.

Although I agree that their products portfolio is not bad, I think it's simply not good enough either.
How exactly do you expect the company to be growing when their market is shrinking?

 

[AlphaWolf]

http://finance.yahoo.com/news/amd-beats-street-income-revenue-225004279.html

SUNNYVALE, Calif. (AP) -- Chipmaker Advanced Micro Devices Inc. said Thursday that it had a net loss in the latest quarter, largely because of an accounting charge related to a revised supply agreement with its primary manufacturer.

http://seekingalpha.com/article/512...results-earnings-call-transcript?source=yahoo

Our improved execution resulted in better-than-expected revenue of $1.59 billion for the seasonally down first quarter, a 6% sequential decrease and a 2% decrease year-over-year. First quarter non-GAAP income was $92 million. This is a 64% improvement from the year-ago period, which was driven by gross margin improvements resulting from a richer product mix and operational efficiencies.

Basically they beat the analysts estimations for the quarter and posted a net loss because of a $703 million 1 time charge.

 

[Dave Baumann]

The one-time charge is actually the one that is discussed at the top of this page (post 2001).

And UT, your quote from the press release misses the relevant information:

• Graphics segment revenue was flat sequentially and decreased 7 percent year-over-year. GPU revenue was up in a seasonally down quarter, due to higher improved desktop GPU ASP in the channel, offset by seasonally lower game console royalty revenue. The year-over-year decrease was primarily driven by lower demand for desktop and mobile graphics.

 

[3dilettante]

Q1/2012 number are out:
http://phx.corporate-ir.net/phoenix.zhtml?c=74093&p=irol-newsArticle&ID=1685255&highlight=

AMD has IMO one of the best product stacks in their history plus a competitive advantage in GPU business, yet they made a loss. How?

The big ticket item was AMD taking hundreds of (edit: make that millions not billions) of dollars in charges to not use GF for certain products.
Even if GPUs were doing gangbusters, they still don't amount to much in the grand scheme of things.
Well, maybe it could matter if they had Nvidia's professional market presence and revenue, but they don't.

AMD's APU products range from nice to tepid, depending on the product. Brazos does very well, although it sells in large numbers for a low price.
Larger APUs sell quite a bit of silicon for the lower price ranges, and Llano's manufacturability has only improved from disastrous to not all that good.
AMD's position against Intel in non-APU chips is still that of being a significantly discounted bargain alternative that sells up to twice as much silicon for the same price for at best slightly inferior results.

 

[Mariner]

The big ticket item was AMD taking hundreds of billions of dollars in charges to not use GF for certain products.

Cripes!

 

[3dilettante]

Cripes!

Whoops, that should be millions.

 

[3dilettante]

Now the story is that AMD is using GF for its 28nm APUs.

I'm curious what exactly they took a $700 million charge for if this is the case.

 

[CarstenS]

The big ticket item was AMD taking hundreds of (edit: make that millions not billions) of dollars in charges to not use GF for certain products.

Ah, ok. I didn't catch that from taking a glimpse at the PR.

 

[3dilettante]

I wish I was more versed in the mysteries of corporate finance.
AMD took a charge for its divesture of GF stock as well as a payout that nixed exclusivity for certain undisclosed 28nm APU products.

Did this mean AMD paid GF for the option to cancel the Wichita and Krishna, or to allow the latest spin for Brazos to be on TSMC?
With the news that AMD's next APUs are on GF again, is there a different interpretation besides AMD taking a large charge for the priviledge to choose to not do anything differently?

 

[Silent_Buddha]

I think it's most likely a charge to get out of a contract that required them to manufacture all or certain CPU/APU lines at GF.

Having said contract not only would limit their choices "obviously" but also limit their ability to negotiate potentially lower costs. Of course, if there was any sort of price guarantee then they potentially could end up paying more per chip/wafer despite having the ability to shop around if prices rise drastically.

The other part of being able to have that choice is that if a critical node is delayed at one Fab in theory they could move to the competitor in order to get product to market while it is still relevant. This is assuming they also develope their designs with the other Fab's process in mind.

None of that says that TSMC will ever be a better option than GF. But the ability to be flexible to market conditions may have been deemed worth that one time fee.

Regards,
SB

 

[3dilettante]

It's an aggreement to waive a requirement for exclusivity for certain 28nm APU products for a certain period of time.

My question now is which ones would that be?
The cancelled Wichita and Krishna are dead, so they can't violate exclusivity.
If Kaveri and Kabini are GF, the remaining possibility is the very low power/embedded APU that comes after Hondo.
Does this imply AMD was planning to ditch TSMC completely at 28nm?

Otherwise, AMD reported the new agreement and then less than two months later chose the exact same outcome except for the fact that it's poorer, because we're running out of time at the end of the Kaveri/Kabini life cycle before the next node obviates the entire point of taking the charge.

 

[Silent_Buddha]

Perhaps the new deal has a lower per wafer cost? So GF wins out if AMD doesn't end up using a lot of wafers while AMD gets a bit more if they use a lot of wafers.

It's so hard to speculate when so little is known about any restructured deal that might or might not be in place.

Regards,
SB

 

[Acert93]

Anandtech has a pretty good summary:

http://www.anandtech.com/show/5764/amd-q112-earnings-report-158b-revenue-590m-net-loss

One way of looking at it is AMD is one their way out of the hole that their fab business had gotten them in. I tend to think someone's comments, was it 3dilettante's, about the importance of fabbing in the coming years make it a difficult proposition to swallow but as it stands it looks for the near term getting out from the weight of having their own fabs may allow AMD to move to consistent annual profits.

How much debt do they currently have outstanding?

 

[Squilliam]

So can anyone hazard a guess as to how much a console design win ought to be worth in terms of royalties?

 

[Kaotik]

So can anyone hazard a guess as to how much a console design win ought to be worth in terms of royalties?

Probably more than AMD is making from their CPUs right now (not counting APUs)

 

[Tahir2]

Is AMD finally out of the "one-time" charges quagmire it seems to have been stuck in since a long time ago [can't remember when it went with a year without a one time charge or waiver or a whatever]?

 

[AlphaWolf]

Should be (I believe they are now completely divested of GF), wall street actually seemed pretty positive (taking this from a couple of analysts reports) about this charge as it allows them to get out from under GF restrictions and be competitive going forward. Read as no more Llano type problems.

 

[I.S.T.]

Llano type problems?

 

[Alexko]

Llano type problems?

Horrible, horrible yields.

 

[CarstenS]

Bad news:
http://ir.amd.com/phoenix.zhtml?c=74093&p=irol-newsArticle&ID=1712911&highlight=

"AMD Announces Preliminary Second Quarter Results
Revenue Expected to Decrease Approximately 11 Percent Sequentially; Company Effectively Manages Gross Margin "
AMDs reasoning for this:
"The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter, specifically softer-than-expected channel sales in China and Europe as well as a weaker consumer buying environment impacting the company's Original Equipment Manufacturer (OEM) business."
Hope they can recover quickly and Trinity will make an impact at least as long as Intels 3rd-gen i3 are not on the market.