The AMD Execution Thread [2007 - 2017]

[Alexko]

AMD reports today.

Advanced Micro Devices Inc Earnings Call (Q4 2014)
http://biz.yahoo.com/cc/9/146819.html

The stock has taken a hit over the past few days dropping over 5% each of the last two trading days and is also down over 7% today to $2.22.

http://finance.yahoo.com/q?s=AMD&ql=0

As I stated on Dec 20, 2014 "the signs are clear that AMD will report much worse numbers than what they estimated" so it seems that news is now known and that AMD will miss their numbers.

In October, AMD estimated that Q4 revenue would decrease 13% (+/- 3%) compared to Q3.
http://www.reuters.com/finance/stocks/AMD.PH/key-developments/article/3087318

The numbers are now out, and revenue is 13.3% lower.
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY3MjI3fENoaWxkSUQ9LTF8VHlwZT0z&t=1

 

[silent_guy]

The results are bad, of course, but the GAAP loss of $330M is not as dramatic as it seems:
- $233M: goodwill impairment. (Due to the low AMD stock price weird enough. How does that work?)
- $71M: restructuring: expected
- $58M: inventory write-off for 2nd generation APUs.

Only the last one is concerning. Maybe they decided to bundle that booboo this quarter because it's small relative to $233M and $71M?

CPU and GPU combined is only $662M per quarter. I wonder how it is divided between them...

OPEX is only $382, down from $428 last quarter. Going further down to $350 this quarter. At some point, something will have to give.

 

[Alexko]

The results are bad, of course, but the GAAP loss of $330M is not as dramatic as it seems:
- $233M: goodwill impairment. (Due to the low AMD stock price weird enough. How does that work?)
- $71M: restructuring: expected
- $58M: inventory write-off for 2nd generation APUs.

Only the last one is concerning. Maybe they decided to bundle that booboo this quarter because it's small relative to $233M and $71M?

CPU and GPU combined is only $662M per quarter. I wonder how it is divided between them...

OPEX is only $382, down from $428 last quarter. Going further down to $350 this quarter. At some point, something will have to give.

The part that really looks bad to me is that they're guiding 15% lower revenue for Q1'2015. I know they don't really have any compelling products right now, but still.

 

[silent_guy]

That's 15% sequentially. What is the YoY number? That's what really matters, but they didn't say and I didn't look it up...

 

[Alexko]

That's 15% sequentially. What is the YoY number? That's what really matters, but they didn't say and I didn't look it up...

Yes, sequentially, but that's still pretty bad. I suppose you could chalk it up to normal seasonality, but the Q4 decline runs very much counter to that, so I wouldn't have expected such a sharp drop for Q1.

Revenue for Q1'2014 was $1.397B.
For Q1'2015, it is projected to be $1.056B, which is more than 24% lower.

 

[silent_guy]

Ouch. Yeah, that's painful.

 

[A1xLLcqAgt0qc2RyMz0y]

Analysts are all over the map on where AMD will be in 12-24 months.

Their 12 month stock price outlook ranges from $2 to $4.50
http://finance.yahoo.com/news/advanced-micro-devices-analyst-roundup-114511664.html

The ones north of $3.50 seem to be based on everything going right for AMD. The problem is that AMD always seems to find a new way to screw up. Also the most rosy outlooks seem to not see competition from Intel, Nvidia and ARM hurting AMD.

As for actual earnings for AMD those are still a ways off and really not much to look at.

http://finance.yahoo.com/q/ae?s=AMD Analyst Estimates

This shows AMD losing 4 cents in 2015Q1 compared to making 2 cents a year ago in 2014Q1.

And for all of 2015 the estimate is only 4 cents for the whole year. As for 2016 the estimate is only 11 cents.

As a reference Nvidia is estimated to earn $1.06 in FY2015 and with a stock price of $20.65 that works out to be a PE of 19.5.

Applying the same PE to AMD in 2016 would have the stock priced at $2.15. If AMD's earnings estimate of 11 cents for 2016 holds true then those $2-$2.50 outlooks seem very likely to happen and more likely those may be on the high side.

 

[silent_guy]

Here's the puzzle of the day: Nvidia is in a bit of an uncomfortable situation with the GTX970 and AMD is obviously trying to make hay out of it. You'd think that according to orthodox economic principles the demand for AMD GPUs would increase, relieving a bit of price pressure.

But we see exactly the opposite: an R9 290X can now be had for $233... (http://techreport.com/news/27755/deal-of-the-week-a-radeon-r9-290x-for-233). It's in GTX960 territory. Mind blown.

Fantastic for customers, of course: for somebody on a budget, I don't see how you could reasonably recommend a GTX 980 over a 290X for 2.3x the price, but that's where we are today.

Is the only conclusion then that there is a massive glut of these cards in the channel? Usually, you'd see this in the financials in the form of rising inventories, but both y/y and q/q AMD inventories when down by 25%.

Maybe the lead times are just too long and it's too early to see this in the financials...

It also make you wonder how this impacts their other product: the 285 and 280X (supposedly discontinued but apparently not?) are completely squeezed now with nowhere to go but further down.

And with prices this low, it may even put pressure on future products, unless R9 3xx exceeds all expectations.

 

[Kaotik]

That's some special offer, the actual "new price" should be $299

 

[swaaye]

I think 380X will make 290(X) quite unappealing and companies with inventory realize this and want inventory gone while it still has some value.

 

[Newguy]

Yeah sounds like an inventory clear before a new gen. Hopefully that's the case.

 

[silent_guy]

BTW: is there still a post-Bitcoin glut or was that never a big deal anyway?

 

[swaaye]

290X has been dropping in value on eBay all of 2014. It was <$400 in March. Right now it is around $200.

 

[3dilettante]

Here's the puzzle of the day: Nvidia is in a bit of an uncomfortable situation with the GTX970 and AMD is obviously trying to make hay out of it. You'd think that according to orthodox economic principles the demand for AMD GPUs would increase, relieving a bit of price pressure.

But we see exactly the opposite: an R9 290X can now be had for $233... (http://techreport.com/news/27755/deal-of-the-week-a-radeon-r9-290x-for-233). It's in GTX960 territory. Mind blown.

Fantastic for customers, of course: for somebody on a budget, I don't see how you could reasonably recommend a GTX 980 over a 290X for 2.3x the price, but that's where we are today.

Is the only conclusion then that there is a massive glut of these cards in the channel? Usually, you'd see this in the financials in the form of rising inventories, but both y/y and q/q AMD inventories when down by 25%.

AMD did promise significant action to correct a channel inventory problem it has had for the last few quarters in the earnings call.
This might be one of those actions.

And then relative, from Q1 to Q2, I think the largest improvement will be around the channel health. We have had this channel problem for a couple

of quarters, and it's important for us to correct that. As we look at the downstream channel, we definitely reduced some inventory in Q4, and we
will take significant action to reduce that inventory in Q1, and that will give us an opportunity to return to a more normal desktop channel business,
which has been relatively successful for us in the past.

The improvement in Q4 was noted, but apparently was insufficient.
Earlier in the call, there was discussion of complications in the first half of 2014 from the "bitcoin effect", and some kind of correction they made to that demand anomaly. Whether that is of the same magnitude as the off-hand reference to "competitive dynamics" in the AIB channel is unclear.
It may be possible to parse it as AMD being unable to time navigate around the cryptocurrency demand spike without starving the channel, or it ramped thinking the bubble would last longer than it did--prior to Nvidia significantly beating back AMD's position.

 

[A1xLLcqAgt0qc2RyMz0y]

AMD stops shipping chips as bloated channel begs 'Please, no more'

http://www.channelregister.co.uk/20...pments/?_ga=1.243264706.1766138135.1392060069

Beleaguered chip underdog AMD is not shipping any new gear to channels this quarter as it bites the bullet to clear existing stock swilling around the industry, estimated to have been in excess of $100m.

A combination of bad forecasting, sliding PC demand and weak supply chain controls led to the inventory nightmare, and channel partners are complaining that broker activity means prices remain unstable.

....

Channel partners confirmed that AMD is not selling new to kit to them as it works through the glut of stock, which should taken until the end of next month, a point echoed by Kumar.

“AMD is in the middle of a big clear out,” one channel partner claimed. “They created a huge grey market and are trying to get it back under control.”

 

[A1xLLcqAgt0qc2RyMz0y]

BTW: is there still a post-Bitcoin glut or was that never a big deal anyway?

The Bitcoin glut played out in early 2014. What is happening now is the AMD's supply channel is a mess with 100's of million dollars of unwanted inventory floating about. So the drastic prices you see on the 290X is the channel trying to get the supply to a more natural balance.

A combination of bad forecasting, sliding PC demand and weak supply chain controls led to the inventory nightmare, and channel partners are complaining that broker activity means prices remain unstable.

http://www.channelregister.co.uk/20...pments/?_ga=1.243264706.1766138135.1392060069

 

[A1xLLcqAgt0qc2RyMz0y]

In October, AMD estimated that Q4 revenue would decrease 13% (+/- 3%) compared to Q3.
http://www.reuters.com/finance/stocks/AMD.PH/key-developments/article/3087318

The numbers are now out, and revenue is 13.3% lower.
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY3MjI3fENoaWxkSUQ9LTF8VHlwZT0z&t=1

It looks like AMD stuffed the channel to make their revenue numbers and they are now paying the price by having unstable supply chain prices and 100's of million dollars of unwanted inventory in it. It has gotten so bad that AMD will not be selling any more into the supply chain for the rest of the quarter.

 

[eastmen]

I can't make a compelling case for the majority of amd's hardware at this point in time. Hopefully whatever they have next year is light years better than their current stuff or they should just stick to video cards

 

[Grall]

It has gotten so bad that AMD will not be selling any more into the supply chain for the rest of the quarter.

So basically, apart from what they might get from ongoing royalty deals and so on (MS, Sony, Nintendo etc), they won't have any more income for almost a month and a half then or what...?

That won't help their bottom line, at all.

 

[silent_guy]

It's strange that these channel issues weren't pointed out during last conference call (except for the APU write-down.)