AMD president and CEO, Dr. Lisa Su, announced the company’s Q4 results, with revenue for the quarter coming in at $1.24 billion, with a gross margin of 29%. Earnings per share based on GAAP results was a loss of $0.47 per share. Compared to Q3, revenue dropped 13%, and year-over-year the drop was 22%. Operating income dropped $393 million from Q3 (623% decrease) and is well down from the Q4 2013 value of $135 million with a posted operating loss this quarter of $330 million. Net income fell from $17 million last quarter and $89 million last year to a $364 million loss, which is a pretty substantial change.

AMD Q4 2014 Financial Results (GAAP)
  Q4'2014 Q3'2014 Q4'2013
Revenue $1.24B $1.43B $1.59B
Operating Income -$330M $63M $135M
Net Income -$364M $17M $89M
Gross Margin 29% 35% 35%
Earnings Per Share -$0.47 $0.02 $0.12

AMD had three large reasons for the loss this quarter which hit their GAAP numbers pretty hard. First, they had yet another write down of their SeaMicro and ATI acquisitions, which they attribute to a decline in their stock prices. This cost them $233 million this quarter. Second, they have had to perform a write down for their second generation APU products, which they have listed higher on their balance sheets than they can sell them for now, however they do expect to sell through their inventory. This contributed to a $58 million non-cash charge. Finally, restructuring charges based on layoffs and the departure of their CEO, as well as real estate restructuring charges cost an additional $71 million. As these are all one time charges, AMD has also released Non-GAAP results which exclude these write downs.

On a Non-GAAP basis, operating income was $36 million, which is down 45% from last quarter’s $66 million value, and down year-over-year from the $91 million operating income from Q4 2013. Net income equates to $2 million, down from $20 million last quarter and $45 million last year, and Non-GAAP earnings per share is $0.00, which can also be spelled as zero, which missed analyst’s expectations of $0.01 per share. The core business is getting to the break-even point, and AMD has said that they have had six consecutive quarters of Non-GAAP profitability, but even that is on a razor’s edge with this quarter’s numbers.

AMD Q4 2014 Financial Results (Non-GAAP)
  Q4'2014 Q3'2014 Q4'2013
Revenue $1.24B $1.43B $1.59B
Operating Income $36M $66M $91M
Net Income $2M $20M $45M
Gross Margin 34% 35% 35%
Earnings Per Share $0.00 $0.03 $0.06

Full numbers for the year had revenue of $5.51 billion, up from $5.30 billion in 2013, and the GAAP operating loss was $155 million for 2014, down from the $103 million operating income for 2013. GAAP net income for 2014 was down as well, to a $403 million loss, exceeding 2013’s loss of $83 million. Non-GAAP values for 2014 were slightly better, with a $235 million operating income and a small profit of $51 million for the fiscal year. Once again, the core business is breaking even, but the heavy write downs are hurting the bottom line.

Looking at individual business lines, the Computing and Graphics segment had a net revenue for Q4 of $662 million, down 15% from Q3 and down 16% from Q4 2013. Lower desktop processor and GPU sales are the blame over last quarter, and desktop processors and chipset sales are called out as the decrease over last year’s numbers. Operating loss for the segment was $56 million, as compared to $17 million in Q3 and $15 million in Q4 2013. Lower channel sales were partially offset by lower operating expenses. Average selling price actually increased both sequentially and year-over-year for processors and chipsets, but GPU selling price decreased year-over-year. This is a soft spot for AMD, and they are diversifying their business outside of the traditional PC space in an attempt to keep one weak line from hurting the company so much. In 2012, about 90% of AMD’s business was based on the traditional PC industry, and by 2014 it was down to 60%, with the other 40% consisting of professional graphics, semi-custom chips, ARM based server, embedded, and ultra low-power clients. By 2015 they are estimating that 50% of their business will be these new markets.

Looking at the Enterprise, Embedded, and Semi-Custom group at AMD, you can see why they are moving that direction. For the full fiscal year, this group contributed $2.374 billion in revenue, and had an operating income of $399 million, both of these are up from 2013 where they managed only $1.577 billion in revenue and $295 million in operating income from this group. Looking at the quarter itself, revenue fell 16% from Q3’s $648 million to $577 million, which AMD attributed to a large run-up of chips for the Xbox One and PlayStation 4 in Q3, as Microsoft and Sony built up inventory for the holiday season. Operating income for Q4 was $109 million, down from $129 million Q4 2013 and up slightly from the $108 million last quarter.

The “All Other” category had no revenue for the quarter, but took a $383 million operating loss, which results in a 2014 operating loss of $478 million for the year. This is the category that is taking the write downs we have already discussed.

Looking ahead to 2015, AMD is listing 2015 as “profitable” at least as far as Non-GAAP figures. Q1 2015 guidance is for a 15% drop in revenue, plus or minus 3%. Gross margin should be up 5% to 34%.

AMD has seen some pretty serious competition in the PC segment, which is still their largest single contributor. Intel has just released their 14 nm parts, with a new CPU architecture due out later this year with Skylake. AMD does have a new APU on the horizon though with Carrizo, and they had working prototypes at CES. While CPU performance will likely not stun anyone due to the new CPU being still based on the Bulldozer architecture, GPU performance should be very competitive. These will be 15 to 35 watt parts, so as far as TDP they will compete against the just launched Broadwell-U. For lower power, AMD will have the Carrizo-L based on Puma+ CPU cores for the 10-25 watt range. All of this will still be on 28 nm though, which puts AMD at a pretty significant disadvantage for efficiency. The increased GPU power may be enough to sway some customers, since many people find they are not CPU bound anyway. Time will tell, and we look forward to seeing the new chips show up so we can test them out.

Source: AMD Investor Relations

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  • witeken - Wednesday, January 21, 2015 - link

    At their earnings call a few days ago, Brian Krzanich said Skylake isn't impacted by Broadwell because it's simply a new architecture, so no new fabs needed, while the new architecture will bring new functionality and performance, so of course releasing Skylake as early as possible is a no-brainer.
  • eanazag - Tuesday, January 20, 2015 - link

    The major PC manufacturers do a poor job of creating the best product for AMD, hence no sales. There is an opportunity to make a decent laptop in the medium price range. Good luck finding an AMD product with a good screen and SSD. Cheap Windows gaming tablets that are not as power optimized during normal use would be another opportunity - gaming battery life would likely be about the same as Intel since the 'wells have done most of their saving at idle. There is no reason there couldn't be one less Intel Atom based tablet or a version equipped with AMD APU.

    The rest of the issues are on AMD management because if you look at Nvidia they are thriving. All AMD needed to do was copy half of Nvidia's corporate plan to be profitable. Clearly something is wrong. They shouldn't be this absent from the market with their available products. Desktop traditional CPUs should suck in sales because they're offerings a 3 years old without even a die shrink. Apple did a die shrink on the A5 in the iPad 2 and it resulted in better battery life.
  • Nam Me - Tuesday, January 20, 2015 - link

    Echo!....Echo!....well said...
  • melgross - Tuesday, January 20, 2015 - link

    AMD does a poor job of producing products that manufacturers want and need, or that users want or need. This is their fault, not the pc market, or the pc manufacturers fault. If what you said would be true, then it would have affected Intel just as much, but they had a record year.
  • Frenetic Pony - Tuesday, January 20, 2015 - link

    They're still relatively competitive with Nvidia in the GPU market, though Nvidia has better marketing, and while 2013 was AMD's turn to take the price for performance crown 2014 was Nvidia's turn. If they can turn it around this year with actual marketing then that should be profitable again this year.

    The real problem though of course is their CPU architecture. Bulldozer goes down as one of the biggest misfires in history on multiple accounts. Meanwhile their low power/mobile designs are good from a CPU perspective, but don't have the fully integrated SOCs and other stuff manufacturers actually want from that category.

    A lot, like the company a lot, will ride on their new CPU architecture out next year being competitive. Though good marketing could help, Nvidia is no better than AMD in most ways for GPUs, but talk to the average person and it's Nvidia all the way somehow. Gamers gushed over the new 980/970 TDP, even though that's a totally irrelevant number to gamers, somehow Nvidia managed to sell that to them as a point anyway. Which, good on them, and bad on AMD.
  • JarredWalton - Wednesday, January 21, 2015 - link

    TDP is not irrelevant. When I fire up two R9 280 or R9 290X GPUs compared to two GTX 970 GPUs, the difference can be felt (heat from my PC) and heard (noise from the fans). Maybe it's my cards, but all my 280 and 290X cards are retail GPUs I bought, not engineering samples.

    I could find quieter 290X options now, but a year ago when I got these it was pretty much all blowers. Also, I can't close up my case without overheating problems with the 290X cards -- I need a bigger tower with more fans I guess, or just run with the side off. Even the GTX 770 and 780 GPUs I have run substantially quieter than the R9 cards I have, with basically similar performance.

    It's a really bad place to be in for AMD. For similar performance, NVIDIA has GTX 970 that uses nearly 100W less per GPU under load, or for better performance there's the GTX 980 that uses 75W less under load but costs more. At idle it doesn't matter as much, but you don't buy gaming GPUs because you want to compare idle values. By the time AMD ships their next GPU, NVIDIA will likely have their "Big Maxwell" GM210 or whatever waiting in the wings if it's needed; if it's not, we'll get GTX 980 Ti to tide us over until the fall.
  • Frenetic Pony - Thursday, January 22, 2015 - link

    Fans can be made less noisy, and you aren't sitting next to your PC, unless you are in a closed off room with an SLI rig sweating bullets it doesn't matter. But that you have such an extreme case of cognitive dissonance that you're willing to argue it shows just how effective Nvidia's PR is versus AMD's. You, and most people, will yell the heavens to defend irrelevance because NVIDIA sold you that it's importance while AMD has failed to point out that it's stupid.
  • FlushedBubblyJock - Sunday, February 15, 2015 - link

    I guess you're new to all of this. See the GTX580 housefires of just a few years ago, and the millions of AMD fan posts who claimed for years power usage was the sole reason to buy only AMD.
    AMD cannot just say now, only several card cores later, that power does not matter, when just a couple years ago, it was all that mattered according to the same -- and of course the pure angelic corporate soul of the honest and trustworthy AMD who would never rebrand.
  • CiccioB - Wednesday, January 21, 2015 - link

    Yes, AMD is competitive because it is selling its products at losses.
    nvidia makes lots of money with their products, meanwhile.
    You can't think that a GPU as large as Hawaii costs the same as the new GM204, which is smaller and uses less power (that means less defective pieces).

    I would like to remind you that nvidia is still selling mid-range GPU as they were top performance ones. This is since GCN has been introduced. To compete with nvidia (real) top class GPU AMD had to create even bigger GPU than it has ever made (since the "small is good" mantra it prosecuted with VLIW). Just imagine how successful is this architecture for AMD cash.

    So, no, AMD is not competitive. And efficiency really counts. Not being able to offer the same performance per watt as nvidia just cuts them out from notebook design wins. They just make notebooks with APUs that none seems to appreciate at all. So this also contributes to their constant loss of market share, incomes and net revenues.

    On desktop, you may be as much as you like an AMD fan, but any mentally sane human being would not really consider a 290X in place of a GTX970, unless the 290X is really (but really) discounted. A 290X has no advantages over the GTX970, but it is just using more power, producing more heat and noise. And the discounted price is not helping AMD at all in being "competitive". >It is just helping in loosing even more money.
  • Vayra - Wednesday, January 21, 2015 - link

    To chime in on the AMD/Nvidia GPU battle; there are other reasons people choose Nvidia over AMD besides marketing.

    - Drivers (still more feature-complete, more stable and faster up to date, faster profile updates after game releases etc. in the Nvidia camp)
    - Software suite (GFE, Shadowplay)
    - Ingame performance (Far Cry, AC come to mind)

    And to say 'gamers don't mind noise or heat' is total nonsense. The enthusiast gamer has always sought after the GPU that offers the best value for money and 'silent gaming' is becoming bigger these days. Besides, NO ONE likes a noisy computer next to them, so being able to reduce that noise is always a big plus. The key to the success of the 970 is not just that - it offers reduced noise and heat IN ADDITION to being a very solid card. Basically you get that as free, additional perks compared to any AMD card.

    A year ago you would be laughed at for skipping an R9 290 based on the amount of noise and heat, because hey, it was the fastest card at that price point and best at high res. It actually still is best at high res. But again, this is where AMD pushed something to market ahead of its time. How many people game at 4k?

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