AMD Q2 '13 results above expectations.

[SiliconWars]

I'm surprised that their CPU division was able to increase sales by $90 million from last quarter, given the state of the PC market.

This is exactly why it's been above expectations. Nobody expected AMD's CPU division to have such a large revenue increase this quarter.

I thought that Kabini came in too late to effect this quarter (most design wins won't come in til next quarter). Also, OEMs waited 3 months before bring out any Richland laptops (and very few new models). Maybe they are declaring sales ahead of time, before the new design wins even are announced?

AMD sold the chips in Q2, and that is how they count revenue. It takes 1-4 months for an OEM to make an end product based on the chips, but AMD still realises the revenue at the time of sale.

IMO, what we are seeing is AMD starting to claw back the market share it gave up a year ago in order to downsize and regroup. I mentioned this before, but it's easier to attack from a position of neutrality or strength than it is to hold on to everything you have while being weak. AMD was treading water for years at ~$1.5 billion, trying to defend everything they had. At ~$1 billion they can grow back to $1.5 while attacking. They have to keep expenses and staff numbers under control or they'll just end up back where they were.

 

[mrmt]

Oh it does get better. A lot of people mistakenly believe that console sales are highest on release, but they aren't.

I wasn't talking about volume but about price. When you order an embedded chip, you usually will pay higher prices in the beginning of the contract and a smaller price in the end.

 

[mrmt]

Sorry Mac Pro was what I meant obviously.

As for big cores, it's still bread and butter for AMD, same as it is for Intel.

Not really, 40% of all their big core business (units) by Q312 was Brazos. Jaguar/Brazos share should be even larger today.

 

[SiliconWars]

I wasn't talking about volume but about price. When you order an embedded chip, you usually will pay higher prices in the beginning of the contract and a smaller price in the end.

Granted, however the chip will go through a few shrinks during it's lifetime which should offset the smaller price, easily so when the volume basically doubles over the next 3-4 years.

This is not best case for AMD right now, it's about 66% of best case I'd reckon. If China opens up to consoles it'll be a gold mine.

 

[mrmt]

IMO, what we are seeing is AMD starting to claw back the market share it gave up a year ago in order to downsize and regroup. I mentioned this before, but it's easier to attack from a position of neutrality or strength than it is to hold on to everything you have while being weak. AMD was treading water for years at ~$1.5 billion, trying to defend everything they had. At ~$1 billion they can grow back to $1.5 while attacking. They have to keep expenses and staff numbers under control or they'll just end up back where they were.

Claw back? Really? And what margins you are forecasting for the PS4/XBO chips? around 5%? Because this is what you'll get if you project an increase in the CPU/GPU units at current gross margins.

 

[Silverforce11]

I'm surprised that their CPU division was able to increase sales by $90 million from last quarter, given the state of the PC market. I thought that Kabini came in too late to effect this quarter (most design wins won't come in til next quarter). Also, OEMs waited 3 months before bring out any Richland laptops (and very few new models). Maybe they are declaring sales ahead of time, before the new design wins even are announced?

A10s must be selling better than people expected. APUs are their only good CPU product TBH.

 

[mrmt]

Granted, however the chip will go through a few shrinks during it's lifetime which should offset the smaller price, easily so when the volume basically doubles over the next 3-4 years.

Margins on the beginning are bigger than in the end of the contract.

 

[SiliconWars]

Claw back? Really? And what margins you are forecasting for the PS4/XBO chips? around 5%? Because this is what you'll get if you project an increase in the CPU/GPU units at current gross margins.

Clearly it's all in the wording. Consoles are going to be massive for AMD in Q3, that's where the 22%+ is coming from. "Clawing back" should impress upon you that it will be a long and slow process of consistent improvements in market share in big cores.

It is quite possible to do both. If they can gain 12% in one quarter then they can do it again. It's not like Intel has anything new and exciting coming up in response?

 

[SiliconWars]

Margins on the beginning are bigger than in the end of the contract.

Proof?

 

[mrmt]

Clearly it's all in the wording. Consoles are going to be massive for AMD in Q3, that's where the 22%+ is coming from. "Clawing back" should impress upon you that it will be a long and slow process of consistent improvements in market share in big cores.

It is quite possible to do both. If they can gain 12% in one quarter then they can do it again. It's not like Intel has anything new and exciting coming up in response?

No, it's not wording. What you are describing is a financial impossibility. I've run the numbers and posted them, run the numbers yourself and see if you can reach a different conclusion.

There is no way they can rise revenue in their CPU business unless you expect sub-10% gross margins for their semi custom business.

 

[USER8000]

 

[galego]

It is interesting that AMD did beat expectations, giving better numbers than most analysts waited, whereas Intel did just the contrary:

A day after its competitor Intel posted financial results for its most recent quarter that came in slightly below analyst's estimates

http://www.theregister.co.uk/2013/07/18/amd_post_small_loss_than_expected/

Care to explain why Kaveri is reportedly delayed and the absense of 3M/4M/6M/8M Steamroller-based products next year? Beema (little cores) and everything else seems on track.

Kaveri A10/A8 are coming this year. There is no 6M/8M Steamroller-based products because are not really needed. 4M PD are being replaced by 2M Steamroller with superior performance. My doubt is on if we will see Warsaw chips replaced by future 3M/4M Steamroller.

 

[wlee15]

Pls, stop it. AMD said it in their CC. I will quote the statements tomorrow.

gross margins on these products are lower. Yes there are positive effects from the custom semi design (lower Opex, no marketing cost) but the fact is: Gross Margins are way down from the coperate average. So if you don't believe me i think you should start to believe AMD...

/edit: "Getting Paid" has nothing to do with Gross Margins.

There's no contradiction here, the SOC for the consoles are quite large so even if the gross margins are relatively low they're still going to charge in the high range of their much smaller APU.

 

[Phynaz]

Still losing revenue share to Intel :/

 

[Idontcare]

Can anyone do the math to see if AMD has a net profit over its lifetime?

They have not accumulated a net profit, they have accumulate a net loss.

Sometime back in 2008 or 2009 they crossed over that point of having lost more money than they made, and they have only added more net losses to that net number since.

 

[Idontcare]

Sure, just after you explain why Broadwell is "delayed" by a year on desktop.

It is interesting that AMD did beat expectations, giving better numbers than most analysts waited, whereas Intel did just the contrary:

http://www.theregister.co.uk/2013/07/18/amd_post_small_loss_than_expected/

Kaveri A10/A8 are coming this year. There is no 6M/8M Steamroller-based products because are not really needed. 4M PD are being replaced by 2M Steamroller with superior performance. My doubt is on if we will see Warsaw chips replaced by future 3M/4M Steamroller.

SiliconWars and galego,

You are both derailing this thread. Bringing up Broadwell and bringing up Intel's quarterly earnings are only going to cause this AMD earnings thread to spiral into an off-topic Intel vs. AMD fanboy war.

Please keep yourselves on topic.

Administrator Idontcare

 

[AtenRa]

Margins on the beginning are bigger than in the end of the contract.

Gross Margins = (Revenue - COGs) / Revenue * 100%

Lets say that AMD will have a revenue from the Consol SoCs in 2013 of 200Mil and Cost Of Goods is at 180mil. Then Gross Margins will be at 10% in 2013.

Now lets say they will still have 200Mil of Revenue from the Consoles in 2014 but COGs will be lower to 150Mil, that will make the Gross Margins at 25% in 2014.

Now lets say that they will increase the Revenue in 2015 at 250Mill and keep the COGs at 150Mil, Gross Margins will be at 40% in 2015.

 

[boxleitnerb]

They have not accumulated a net profit, they have accumulate a net loss.

Sometime back in 2008 or 2009 they crossed over that point of having lost more money than they made, and they have only added more net losses to that net number since.

Could someone with sound financial knowledge please explain to me how it is possible that AMD still lives and gets fresh cash influx from their investors?

Maybe I'm thinking in too simple terms, but if I don't make profit and if I cannot pay back (all) of my debts, banks certainly will decline any new credits and my business will fail. Why does this not happen to AMD? Who in their right mind would give them money again and again and again and get nothing back in return? Well, now the situation looks better, but what about say 5 years ago?

 

[zlatan]

Any question why AMD won the console designs?

I said before. AMD was the only company who undertook the task to build APUs with architectural integration before 2014. MS and Sony didn't have a choice. All other designs are MCMs like Wii U.

 

[pablo87]

Console is going to be very good for AMD, even if gross margins are half. Because AMD's PC ASP is so low, they really don't make much money on each APU sold; its conceivable that they could end up making more on each console SOC sold. Not to mention, no inventory risk, marketing soft dollars, duking it out with Intel, etc...

They still lost $70MM by my count. And the PC market will continue to shrink, especially in Consumer (Microsoft was -20%? Scary), AMD's bread and butter. And the WSA cloud still hangs over their head.

So even with Console, there is no reasonable prospect for sustained profitability, unless they can sign more such deals..

 

[Centauri]

(Microsoft was -20%? Scary)

Only because of a Surface write off. Otherwise they were flat against last quarter.

 

[lefty2]

A10s must be selling better than people expected. APUs are their only good CPU product TBH.

I don't know about that. The A10-5750M has only one single design win.

 

[SiliconWars]

Transcript is up - http://seekingalpha.com/article/155...sses-q2-2013-results-earnings-call-transcript

Highlights -

We remain on track to deliver more than 20% of our revenue from our semi-custom and embedded businesses in the fourth quarter.

Interesting to see "more than" now. If we assume $1.5 billion Q4 revenue then that means some $300 million will be coming from consoles and embedded.

In the high and enthusiast portion of the desktop’s GPU market, the combination of our powerful graphics products and the Never Settle game bundle program drove significant share gain and a richer mix in the channel from the previous quarter.

Graphics and visual solution segment revenue was $320 million, down 5% compared to the prior quarter, primarily due to lower game console royalties.

Nice try Sontin but I nailed those two.

in the semicustom space for example the market is differentiated from the rest of our business as our customers engage with us very early to jointly define and fund engineering development of customized products. Development revenue and the associated cost are incurred during the development cycle of the given products

That's a nice bonus, getting Sony and MS to help pay for development.

The semicustom model has the potential of providing a long term revenue stream based on high volumes which results in gross margin that is lower than the corporate average but has significant revenue and earning power as volumes ramp.

In addition as we transition the shipping silicon products, game console royalty revenue included in the semicustom business is expected to decrease moving forward although the decline will be more than offset by our growing semicustom development and product revenues.

At the mid-point of revenue guidance, AMD expects to be profitable at the net income level.

On the WSA -

we do have a commitment this year as you called it a $1.15 billion, be on track to meet the commitments. And as we finished half the year here, approximately half of those obligations have been extinguished.

Seems like they are able to keep up with the WSA so far but they still won't comment on where the consoles are being made.

Mostly it was all about consoles as you would expect.

 

[bgt]

I hope they will do better now, I like their products lately. FX series and APU series are nice products.

 

[mrmt]

Could someone with sound financial knowledge please explain to me how it is possible that AMD still lives and gets fresh cash influx from their investors?

You promise the world the moon, issue new shares/debt for a very high prices/low yields, you fail to reach the targets, and from there share price plunge and/or debt gets defaulted.

AMD was always a very high debt company, and the only reason we didn't see a default is because they offloaded a lot of debt to Globalfoundries once they spun off the fabs.