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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  • Wreckage - Tuesday, January 20, 2015 - link

    The overall PC market did very well last quarter. Console sales should have been highest in the 4th quarter. Yet AMD still lost 1/3 of a billion. They did nothing to reduce their debt and have not released anything of relevance in a while. 3 top executives just left the company and the stock has lost nearly half of it's value in a year.
  • eanazag - Tuesday, January 20, 2015 - link

    When did the stock have value?
  • Nam Me - Tuesday, January 20, 2015 - link

    Good question.. w/ answer...
  • JumpingJack - Tuesday, January 20, 2015 - link

    AMD traded around 4.50-4.55 through the middle of July last year, today they are trading around 2.24-2.30 (today's trading range), that is roughly half the value within the last 12 month period.
  • mfinn999 - Wednesday, January 21, 2015 - link

    Several years ago I was such an AMD fanboy I bought 100 shares of their stock at $21/share. THAT turned out well.
  • maglito - Wednesday, January 21, 2015 - link

    Ouch $21/share! I've got serious AMD red spot in my portfolio too.

    AMD has a huge success story on it's hands with Carrizo if it can get it to market at least within the niche HTPC segment. Right now the only way to get 18Gbps HDMI 2.0 out of a PC is with Nvidia 980/970 $$$ video cards. AMD or a partner can offer a NUC or microITX all in one board/box for less than 1/2 the price of the Nvidia video card alone. There are lots of Ultra HD / 4k TVs that can support a proper 60Hz signal via HDMI 2.0 (almost no TVs have display port) and no reasonable HTPC solution currently on the market.

    AMD, get Carrizo out in NUC or (complete on board) MicroITX ASAP!!! The window of opportunity is closing fast.
  • medi03 - Saturday, January 24, 2015 - link

    Dear god,

    please bless notebook manufacturers using AMD's APUs.

    I couldn't care less about "single threaded CPU performance" of Intel chips, my Excel and Word are fast enough for many years, but buying an Intel notebook with discrete GPU really hurts my wallet.

  • BlueBlazer - Saturday, January 24, 2015 - link

    Single threaded performance is one factor that many mobile CPUs should have as it meant that the core has very high efficiency per clock as typically most mobile CPUs run at very low clock frequencies.

    Laptops with discrete mobile GPU are usually meant for some gaming and of course costs much more. Just take a look at gaming laptops such as Alienware for example. Meanwhile APUs are usually rarely adequate for games on mobile laptop platforms.
  • Nowwhat - Wednesday, February 4, 2015 - link

    APU 's are best suited for game consoles, cheap low-midrange laptops & PC's, servers, NAS, tablets and smartphones if AMD can lower the TDP and enhance the performance of the APU 's. Maybe a little more cache memory (L3 Cache) and some GDDR5 memory... ?

    AMD could also integrate their APU 's with their high-end video-cards and offer a multiple APU system (Quad-CrossFireX) on cheap motherboards without CPU's, memory-banks and a north-bridge.
  • FlushedBubblyJock - Sunday, February 15, 2015 - link

    A desperation hole prayer will change nothing, but it was a delight to see. ROFL thank you

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