Advanced Micro Devices has posted financial results for the fourth quarter of 2013 as well as for the full fiscal year. Thanks to strong orders of chips for Microsoft Corp.’s Xbox One and Sony Corp.’s PlayStation 4, the firm managed to boost its earning and profitability. This happened while AMD’s core business – x86 microprocessors – suffered a major decline in Q4 2013.
"Strong execution of our strategic transformation plan drove significant revenue growth and improved profitability in the fourth quarter. The continued ramp of our semi-custom SoCs and leadership graphics products resulted in a 38% revenue increase from the year ago quarter. Our focus in 2014 is to deliver revenue growth and profitability for the full year by leveraging our differentiated IP to drive success in our targeted new markets and core businesses," said Rory Read, president and chief executive officer of AMD.
Results for Q4 FY2013
AMD announced revenue for the Q4 FY2013 of $1.59 billion, operating income of $135 million and net income of $89 million, or $0.12 per share. Gross margin for the quarter was down 1% to 35%. The company reported non-GAAP operating income of $91 million and non-GAAP net income of $45 million, or $0.06 per share. Operating expenses were $418 million, including a net benefit of $48 million in patent related legal settlements. Non-GAAP operating expenses were $462 million, higher than the previous guidance of approximately $450 million primarily due to higher sales and marketing expenses during the holiday period and higher expenses for employee related performance plans. R&D expenses for the quarter were $293 million, 18% of net revenue; SG&A expenses were $169 million, 11% of net revenue.
Computing Solutions segment (which includes microprocessors, accelerated processing units, chipsets, embedded processors and server chips) revenue was $722 million, down 9% sequentially and 13% year-over-year, primarily due to decreased chipset and notebook unit shipments. Computing Solutions operating loss was $7 million, as compared to an operating income of $22 million in Q3 2013, primarily due to lower revenue and higher expenses for marketing and employee related performance plans.
- Client product revenue decreased sequentially, primarily due to lower notebook microprocessor sales in the quarter.
- Microprocessor ASP increased sequentially, due to a richer mix of client FX-series and higher-end APUs sold.
Graphics and Visual Solutions (GVS) segment (which includes consumer and professional GPUs, revenue from semi-custom products and development and game console royalties) revenue was $865 million, up 29% compared to the prior quarter, driven by increased shipments of AMD’s semi-custom system-on-chips (SoC) for the PlayStation 4 and Xbox One as well as the latest AMD Radeon series of GPU products. GVS segment operating income was $121 million.
- Graphics processing unit (GPU) revenue increased sequentially, driven by sales of AMD’s new-generation AMD Radeon R7 and R9 series GPUs.
- GPU ASP increased sequentially, driven by new product sales in the quarter.
“Strong demand for our latest graphics chips drove a significant sequential increase in GPU revenue and ASP. Our strategy to attack the desktop add inboard channel worked well in the quarter, and we expect this trend to continue. We believe we are well positioned to gain graphics market share in 2014 based on continued channel momentum, secured wins for our new R7 and R9 discrete mobile GPUs, and strong adoption in the professional graphics space,” said Mr. Read.
Results for FY2013
For the year ended December 28, 2013, AMD reported revenue of $5.3 billion, operating income of $103 million and a net loss of $83 million, or $0.11 per share. Gross margin of 37% was up 14% year-over-year.
In 2013, AMD completed the first phases of the strategic transformation plan it outlined in October 2012, achieving key milestones in its corporate and financial transformation.
“We completed a comprehensive reset and restructure of our company, stabilized the business and exited the year with significantly lower operating expenses, from $592 million in Q1 2012 to $462 million in Q4 2013. We also returned to profitability and positive free cash flow in the second half of 2013 and maintained our cash balances above $1.1 billion, significantly higher than our target minimum of $700 million. The financial results for the third and fourth quarter of 2013 were evidence of our efforts, as we diversify our business, deriving more than 30% of revenues from semi-custom and embedded products, two of our five growth pillars in the second half of 2013,” said Devinder Kumar, chief financial officer of AMD.
AMD’s total wafer purchases from GlobalFoundries in 2013 were approximately $960 million, lower than the previously estimated $1.15 billion, due to lower fourth quarter purchases. There were no penalties associated with the reduction. AMD is working on its 2014 wafer supply agreement with GlobalFoundries, based on 2014 full year demand expectations, with the goal to manage inventory flat to down year-over-year. In Q1 2014, AMD made the final $200 million payment related to the reduction of the take or pay wafer obligation commitments in 2012. In addition, the company expects wafer purchases of approximately $250 million in Q1 2014.
For Q1 2014 AMD expects revenue to decrease 16% sequentially, +/-3%. The company projects computing solutions segment revenue to be down, in line with seasonality, and it expects GVS segment revenue to be down, coming off a strong Q4 for its semi-custom SoCs. The firm anticipates non-GAAP gross margin to be approximately 35%; operating expenses to be approximately $420 million and inventory to be approximately flat from Q4 2013 levels.
For 2014 the company plans to grow revenue for the year and to be profitable at the net income level for the. The firm expects its non-GAAP operating expenses to be in the quarterly range of approximately $420 to $450 million, depending on the timing of R&D expenses and the revenue profile.