Resistance is futile...Well silent_guy, at least you tried
The AMD Execution Thread [2007 - 2017]
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well I don't know why people is talking so much about potential layoff, the real (and official) news is that AMD has contracted $500 million line of credit. This is bad, real bad, cause it shows that their cash flow is not enough for their opex. When you start to lend money to basically run your business, you are doing something really wrong. Hopefully, this money will be used to accommodate temporally cost associated to a change of strategy and a better future...
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I find this perspective interesting, as it has some gaps IMHO - I think that the growth opportunity of grabbing some business from Intel is notably better that fighting over scraps with NVIDIA and other fringe ARM players. It is unclear how it is preferable to move from a high-margin, two-competitor business (in which you are one of the competitors), where a large advantage to incumbency has been accrued, to a cutthroat peanuts one where you have little to no opportunities for diversification. This non x86 El Dorado that AMD keeps talking about appears, to someone simple like me, to be mostly a fabrication. Being the nth player in a market where Qualcomm and Samsung roam and where the margin structure for IHVs is much worse than the one AMD is trying to scramble away from does not strike me as salvation. What exactly is AMD's claim to fame as a design / IP house, outside of the desktop(server, notebook etc.) (and tightly connected things like consoles)?
Right now is a good time to secure a loan, interest rates being what they are. That by itself does not mean bad news. Healthy companies are tapping credit lines now. But then again AMD is pretty far from a healthy company.
I think this notion is overclocked_enthusiasm's own extrapolation more than AMD's idea. If you look through their roadmaps and official statements, the only non-x86 market they're aiming for is ARM servers, which is still very small and up for grabs, and to which they bring a couple of valuable things: the Sea Micro fabric/expertise, plus their own server expertise and OEM relationships.
Everything else is x86 or graphics: from Kaveri to Beema/Mullins to semi-custom SoCs and, of course, Radeons/FirePros. I'm sure that if someone asks them to make an ARM-based semi-custom SoC, they'll gladly oblige, but they don't seem to have any plans to fight Qualcomm and Samsung on their own turf. That would be NVIDIA's plan, however.
You might argue that APUs are somewhat different from the traditional x86 market, but this argument would be just as valid for Haswell/Broadwell and Bay Trail, which means that this is just what the x86 market demands today, and AMD is merely evolving with it. AMD spends a relatively larger amount of silicon on graphics, but that's about it.
I think people have the impression of AMD compromising x86 because their APUs are so far behind Intel's APUs on the CPU performance front.
Of course on the other hand Intel has their -E chips. Intel markets them as special super high-end options, but that's only because AMD can't touch them.
Of course on the other hand Intel has their -E chips. Intel markets them as special super high-end options, but that's only because AMD can't touch them.
overclocked_enthusiasm
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I guess you nailed it...I am viewing the APU in a different light than the traditional x86 CPU battle waged with Intel over the past 20 years. So when I say "non x86" or "non traditional x86" markets that is indeed what I am referring to in addition to discrete GPU and ARM. As a percentage of total revenue, the x86 CPU business was 95% 2 years ago...70% today...and projected 50% in 2 years. That is a HUGE change in their business model in a very short period of time. I am betting that will pay off huge for AMD. Sorry for any confusion on my part.
Q3 AMD CC CEO Rory Read
"Over the next two years, we will continue to transform AMD to expand beyond a slowing, transitioning PC industry, as we create a more diverse company and look to generate approximately 50% of our revenue from these new high-growth markets. We have strategically targeted the
semi-custom ultra-low power client, embedded, dense server and the professional graphics markets, where we can offer differentiated products that leverage our APU and graphic IP. Our strategy allows us to continue to invest in the products that will drive growth, while effectively managing operating expenses. This is best exemplified by the 10% sequential reduction in our expense to revenue ratio, as we drive to best-in-class performance on this key metric."
"So in summary, we are successfully hitting key milestones of our three-step strategy to diversify and transform our business. We have completed the first step, restructuring AMD and stabilizing our business. We effectively managed cash at the optimal levels and beat our $450 million quarterly
operating expense goal in the third quarter. We are now in the second phase, accelerating our performance by consistently executing our product road map and growing our new businesses. Our success here drove 26% sequential revenue growth and returned AMD to profitability and generated
free cash flow in the third quarter. Our progress sets us up to ultimately transform AMD in the third and final step, as we leverage our IP and design expertise from our traditional businesses to generate approximately 50% of our future revenues from high-growth markets over the next two years. We are in the middle of a multi-year journey we outlined over a year ago to redefine AMD as a leader across a more diverse set of growth markets."
"But think about it, two years ago, we were 90% to 95% of our business centered over PCs. And we've launched a clear strategy to diversify our portfolio, taking our IP -- leadership IP -- in Graphics and CPU, and taking it into adjacent segments where there's high growth for 3, 5, 7 years and stick your opportunities. We see that as an opportunity to drive 50% or more of our business over that time horizon. And if you look at the results in the third quarter, we're already seeing the benefits of that opportunity, with over 30% of our revenue now coming from semi-custom and our embedded businesses. We see it as an important business in PC, but its time is changing and the go-go era is over. We need to move and attack the new opportunities where the market is going. And that's what we're doing."
http://ir.amd.com/phoenix.zhtml?c=74093&p=quarterlyearnings
Read the Q3 2013 Transcript. I REALLY like the tone of this management team considering the last one I heard was Ruiz and the other clowns.
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overclocked_enthusiasm
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BTW, concerning their recently announced $500 million line of credit. I think this money will be used to complete the restructuring plan started a few years ago and is NOT a red flag. If it was, AMD stock would have tanked..it didn't...it went up. Will headcount be reduced via layoffs as a part of this restructuring? Possibly, but that isn't a salient point unless of course you work at AMD. Just 7 years ago they had their own fabs...then went fabless...now they are transitioned 30-50% of their business model to non-traditional segments. I can guarantee you they have too much of certain assets (people included) and not enough of others and maybe some in the wrong place. It is a normal healthy thing to reposition or reallocate your assets to accommodate your change in business model.
AMD CFO
"We have made significant progress during the last year strengthening our capital structure to support our strategic growth plans," said Devinder Kumar, AMD senior vice president and chief financial officer. "We expect to end the fourth quarter of 2013 with cash, cash equivalents and marketable securities, including long-term marketable securities, balances of approximately $1.2 billion and remain committed to maintaining ongoing balances of approximately $1.1 billion, our target optimal level. This secured revolving line of credit provides AMD with greater financial flexibility as we continue transforming AMD for growth across a more diverse set of markets."
AMD CFO
"We have made significant progress during the last year strengthening our capital structure to support our strategic growth plans," said Devinder Kumar, AMD senior vice president and chief financial officer. "We expect to end the fourth quarter of 2013 with cash, cash equivalents and marketable securities, including long-term marketable securities, balances of approximately $1.2 billion and remain committed to maintaining ongoing balances of approximately $1.1 billion, our target optimal level. This secured revolving line of credit provides AMD with greater financial flexibility as we continue transforming AMD for growth across a more diverse set of markets."
overclocked_enthusiasm
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Can somebody shed some light on this?
There are some negative research notes by the ANALysts and "media" on AMD yesterday and today. In essence they are claiming that AMD will be screwed by fulfilling their Q4 2013 commitment to Global Foundries in either creating excess inventory, reneging on agreement, and/or a combination of the two. I respond to each claim below using the Q3 2013 AMD CC as rebuttal...where I am wrong? As an aside, am I correct to assume that GF only produces 32 nm CPUs for AMD and TSMC handles all the 28nm APUs and GPUs? Can they low-ball the WSA agreement for 2014 or is there a minimun AMD MUST order from GF as part of the sale?
1. Can't meet 2013 wafer commitment to Global Foundries...
"Talking about the WSA from GLOBALFOUNDRIES, we're on track to meet the commitment for the 2013 WSA."
2. Accepting remaining wafers from Global Foundries for 2013 contract will lead to excess inventory build...
"As I said in my prepared remarks, I expect inventory levels to remain essentially flat from where we ended Q3. Recall that it's a steep ramp in the business. We introduced the semi-custom products, the new products that Lisa referenced earlier, the R-7, R-9 series. So, I expect that in the Q4 timeframe, when we report the results, we'll be essentially flat to Q3."
3. AMD will have trouble paying $200 million payment due in Q1 2014 to GlobalFoundries...
"There's another $200 million of that left to be paid in Q1, 2014. So if you relate that from a cash standpoint, we have, as I projected, $1.2 billion of cash, revenues can be up in Q4, and then when we get to Q1, we collect the cash for the revenue that we're going to have in Q4, pay the $200 million. And that's where I'm projecting maintaining at the optimal range of the $1.1 billion from a cash standpoint."
4. Console bet is played out at AMD
"Now in terms of the question about gaming -- gaming is going to be an important driver of the business. And if you think about consoles traditionally, that's a five-plus year business, and it generally peaks in the third year. It will have some seasonality in the first half of the year, but we think there's strong demand and opportunity for us to continue to have a very good business."
There are some negative research notes by the ANALysts and "media" on AMD yesterday and today. In essence they are claiming that AMD will be screwed by fulfilling their Q4 2013 commitment to Global Foundries in either creating excess inventory, reneging on agreement, and/or a combination of the two. I respond to each claim below using the Q3 2013 AMD CC as rebuttal...where I am wrong? As an aside, am I correct to assume that GF only produces 32 nm CPUs for AMD and TSMC handles all the 28nm APUs and GPUs? Can they low-ball the WSA agreement for 2014 or is there a minimun AMD MUST order from GF as part of the sale?
1. Can't meet 2013 wafer commitment to Global Foundries...
"Talking about the WSA from GLOBALFOUNDRIES, we're on track to meet the commitment for the 2013 WSA."
2. Accepting remaining wafers from Global Foundries for 2013 contract will lead to excess inventory build...
"As I said in my prepared remarks, I expect inventory levels to remain essentially flat from where we ended Q3. Recall that it's a steep ramp in the business. We introduced the semi-custom products, the new products that Lisa referenced earlier, the R-7, R-9 series. So, I expect that in the Q4 timeframe, when we report the results, we'll be essentially flat to Q3."
3. AMD will have trouble paying $200 million payment due in Q1 2014 to GlobalFoundries...
"There's another $200 million of that left to be paid in Q1, 2014. So if you relate that from a cash standpoint, we have, as I projected, $1.2 billion of cash, revenues can be up in Q4, and then when we get to Q1, we collect the cash for the revenue that we're going to have in Q4, pay the $200 million. And that's where I'm projecting maintaining at the optimal range of the $1.1 billion from a cash standpoint."
4. Console bet is played out at AMD
"Now in terms of the question about gaming -- gaming is going to be an important driver of the business. And if you think about consoles traditionally, that's a five-plus year business, and it generally peaks in the third year. It will have some seasonality in the first half of the year, but we think there's strong demand and opportunity for us to continue to have a very good business."
overclocked_enthusiasm
Regular
Is there a link that proves Kaveri will be made at Global? Everything I have seen that says Kaveri is made at Global is conjecture at this point...conjecture that I agree with btw.
There are pictures of engineering samples with the "diffused in Germany" marking on them. Only GloFo has fabs in Germany.
overclocked_enthusiasm
Regular
So in your opinion, is the $405 million remaining in Q4 2013 and the $250 million in Q1 2014 on the WSA a doable ramp volume or is it heavy? If it is heavy, can't they just adjust the 2014 WSA downward assuming the 28nm wafers they buy now will be viable later in 2014 to be used?
I wouldn't know about the specific numbers, but to be honest I'm really not convinced they're accurate, since they seem to contradict Read's statements.
That said, I suppose AMD could indeed negotiate some kind of partial transfer of the commitment from 2013 to 2014. But frankly, if things were this bad, I think AMD would just move some manufacturing from TSMC to GloFo. Since the latter can make Kaveri, Beema/Mullins should be possible too, for example.
overclocked_enthusiasm
Regular
The $405 million left on the 2013 WSA is confirmed through a few different sources as well as the $250 million for Q1 2014. I think there is little (if any) doubt left Kaveri will be manufactured at GloFo and that is what is so disturbing about the recent hatchet jobs about AMD in the press. The implications were clear "AMD is screwed because all they make at GloFo is 32nm crap and that $605 million commitment will build useless inventory OR cause a termination payment for AMD to get relief".
The lack of insight, the lack of research OR the blatant disregard of the facts by these ANALysts is really sad. So the $64,000 question still remains...will the 28nm ramp at GloFo eat up that $404 million in wafers for Q4 2013 and $250 million for Q1 2014? If so, this company is in GREAT shape for share price appreciation. I am taking AMD management at their word...so I say yes.
overclocked_enthusiasm
Regular
http://www.extremetech.com/gaming/1...ossibly-the-end-of-amds-big-core-x86-business
Yep...beat me to it. This is what I was talking about when I said AMD appears to exiting the traditional x86 market. I LOVE this change. I am building a 20,000 share long position...1/2 way there!
overclocked_enthusiasm
Regular
http://cc.talkpoint.com/cred001/120313a_jw/?entity=45_6UG3KMJ
Skip to 20:42
Basically CFO implied all semi-custom products will be coming from GloFo in 2014...including "game console products". This is the first time it has been confirmed. He also confirmed there will be no problem meeting the "$400 million for the remaining 2013 WSA obligation". I liked his comments about ARM as well. They are definitely seeking greener pastures away from the traditional battles with Intel...can you blame them?
Skip to 20:42
Basically CFO implied all semi-custom products will be coming from GloFo in 2014...including "game console products". This is the first time it has been confirmed. He also confirmed there will be no problem meeting the "$400 million for the remaining 2013 WSA obligation". I liked his comments about ARM as well. They are definitely seeking greener pastures away from the traditional battles with Intel...can you blame them?
Well that's good. I'll just buy Intel rigs now. Will convert my htpc over to them too next year
Yes; Some of the contracts they signed with Intel are atrocious.
AMD have a history of poor decisions, the Intel anti competitive scandal cannot take full credit for AMD's current lack of competitive CPU's.
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