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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  • CiccioB - Wednesday, January 21, 2015 - link

    And you have to understand financial results.
    The write-down just means that in previous quarters they overstimated that value that now is corrected its real value.
    It was just expected, as such operations make some quarters that looks good (with positive gains) and just one quarter that look bad. If you dilute this loss to the other 3 positive quarters, they would all end with negative results, making the company look just bad every quarter instead of giving some hope to the investors.

    If you look at the single results of each division, apart this extra write down, you'll see that each of them had a negative result with respect to last year. By the way, 22% less revenue YoY surely can't help making better financial perfomances. And next quarter seem to be even worse.
    Simply put, AMD isn't able to sell its products anymore. And that is what really counts for investors (that actually are abandoning the ship).
  • Kjella - Wednesday, January 21, 2015 - link

    AMD has lost that money and the write-down is just recognizing it. The acquisitions and severence pay is a bit different, but the inventory write-down is basically saying we've underestimated our losses by overestimating the value of our inventory. They just hope the investors will be dazzled by the genuine one-time writeoffs to notice their non-GAAP figures are misleading.
  • Achaios - Wednesday, January 21, 2015 - link

    I am really sorry to see AMD in such a sad state. AMD is extremely important b/c they are the sole competitor to Intel and NVIDIA. A strong and profitable AMD that produces superior CPUs and GPUs means lower prices for the said products for the end user.

    Latest AMD CPUs have got the single threaded performance of Intel CPUs made in 2008, and the latest top-of-the-line Radeon GPUs produce so much heat and consume so much power that no really savvy person can go for them over the NVIDIA alternatives, even if the latter cost more and to make things worse they offer no performance advantage.

    AMD is in a very bad spot, and they need to do radical things if they want to stay in business.
  • anubis44 - Wednesday, January 21, 2015 - link

    "the latest top-of-the-line Radeon GPUs produce so much heat and consume so much power that no really savvy person can go for them over the NVIDIA alternatives, even if the latter cost more and to make things worse they offer no performance advantage."

    Well, in my favourite PC game (Company of Heroes 2), the R9 290 is as fast or faster than the GTX970, and I got it for $259 canadian, vs. the cheapest GTX970 being $380 in Canada, so I went for the R9 290 (Gigabyte Windforce), and flashed the bios to 1050MHz in 5 minutes. The Windforce cooler is extremely effective and quiet. I don't hear the card at all in my CoolerMaster Storm Stryker case, so I'd say you're quite wrong about the R9 290 not being competitive, and yes, I'm a 'savvy' tech person, I'd say, after having built all my previous PCs since 1995.

    nVidia simply continues to rip people off and the worst part is that people seem to like it anyhow. If you want to bend over for Jen Hsun and his proprietary technologies that lock you in to higher prices, please be my guest, but don't try to put a false spin on AMD's competitiveness.
  • mrdude - Wednesday, January 21, 2015 - link

    AMD's GPU and APU sales are stumbling and AMD expects that to continue thru to Q2/Q3 2015. ASPs fell and build up in inventory has forced yet another write-off. During Q3 conference call, Devinder Kumar specifically pointed out the GPU division for its poor performance and attributed that to market dynamics and competition. Being relegated to the lower segments of the market, along with a heavy reliance on sales in Asia, has hammered them quite hard.

    Are you sure it's him who's putting the false spin on AMD competitiveness?

    AMD desperately needs new CPU and GPU uArchs. Primarily, they need uArchs tuned for efficiency and low cost while offering great performance. Right now, they've got bigger dies that consumer higher power that they're forced into charging less money for. All the while, they're losing market share and the eyes of the consumer.

    It's the consoles that are keeping the company afloat at the moment, and presumably into 2015. The upside seems to be the EESC space, where AMD has made some inroads via their APUs and embedded products along with securing another couple of design wins.

    Given the breakdown of their revenue, both expected and reported, it looks like the appeal of AMD's products are viable within low-margin markets with longer refresh cycles. While that can make for nice added (bonus?) revenue, it won't pay for costly development of their CPU, GPU, and other microarchitectures.

    Arguing that AMD's current products are competitive is farcical. They're competitive in certain segments and some aspects, sure, but as a whole they're suffering.
  • chizow - Wednesday, January 21, 2015 - link

    lol @ anubis44, bitter AMD fanboy until the end I see.

    Better start downloading and archiving those driver releases, keep em safe! :D
  • anubis44 - Wednesday, January 21, 2015 - link

    Don't worry, chizow, I've still got my old 3dfx drivers, too. :)

    And keep sucking on Jen Hsun's wang, 'cause due to people like you, nVidia could soon be the only game in town for GPUs.
  • chizow - Wednesday, January 21, 2015 - link

    Yawn, cry me a river, Intel has been the only CPU game in town for 8 years and where has it gotten us? Oh right, more awesome CPUs every. single. year.

    But yes, I can tell you're the clingy fanboy type, its OK, I used to really like 3Dfx too until they went belly-up and I moved on, first to ATI actually, but of course Nvidia has dominated since G80 making my decision to go with them and stay with them, easy!
  • anubis44 - Wednesday, January 21, 2015 - link

    Chizow, you nVidiot, you need to watch this video to see how you're going to be spending at least $100 more for a G-Sync monitor than exactly the same FreeSync version:

    If you're still determined to give nVidia your money, despite their clear and obvious attempts to rip you off, please go right ahead and bend right over.
  • D. Lister - Wednesday, January 21, 2015 - link

    It is just that g-sync is totally optional, just like surround or 3D. The difference between g-sync and freesync is not unlike doing physics - you can do it in software, or you can do it with designated hardware. Freesync is a software solution, while g-sync performs a similar function with custom hardware. Once both techs are available in retail, comparisons will be made, and the better implementation will become apparent.

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