The
earnings report released by Advanced Micro Devices, Inc. (
AMD) yesterday was unpinned by one cheery figure -- a net profit of $61M USD, or 9 cents per share. That's 12.5 percent higher than the average analyst prediction. And it's a major departure from net loss of $43M USD a year before (calendar Q2 2010).
Counterintuitively, revenue was the complete opposite story. AMD's revenue of $1.57B USD was short of the analyst prediction of $1.58B USD. And it represents a 2 percent drop from calendar Q1 2011 and a 5 percent drop from a year ago.
In a way, this is good news as it shows strong evidence that AMD's cost cutting is working better than expected. And there's more interesting news to be gleaned from the report as well.
II. Desktop, Server Revenue Falls, Fusion Saves
CPU revenue held largely flat at $1.21B USD (it actually fell just a few million, year to year), but that was only thanks to the
best-selling "Fusion" advanced processing units, the Llano and Brazos series. While AMD did not reveal an exact breakdown of sales of Fusion mobile chips, other mobile CPUs, desktop CPUs, and server CPUs it did comment that
desktop and server sales were down. While it would not say how much, it did say that the Fusion now accounted for 50 percent of its sales revenue on the mobile side.
The Fusion APUs [
1][
2][
3] combine AMD's core designs with a low-end discrete GPU to produce a chip with decent x86 CPU performance and much better than usual "integrated" graphics performance. Given the competitive price, customers have been embracing the product, which is perfect for budget laptops.
It's no big secret why AMD's desktop and server revenue took a hit. AMD hasn't released a new core design since Phenom II, which first hit the market in December 2008. And the last major architecture redesign was in 2003 with the release of the Athlon 64/Opteron (K8) processors. That's set to change when AMD's Bulldozer core
plows into town later this year.
Bulldozer is built on a 32 nm process. Bulldozer's answer to rival Intel Corp.'s (INTC) single core + hyperthreading is a "module", which actually has two cores. The result is more discrete resources, but not significantly more space on die, according to AMD. Of course AMD has trailed Intel in CPU design and manufacturing processes over the past several years, so it remains to be seen in AMD can live up to its hype. It should be noted that Bulldozer was expected for Q2 2011 and is behind schedule.
AMD's desktop and server revenue were further impacted by reduced chip prices.
III. GPU Sales Post Bigger Drop
More troubling, AMD's GPU revenue fell 17 from Q2 2010 and 11 percent from Q1 2011. It appears rival NVIDIA Corp. (
NVDA) is picking up stream with its
GeForce 500 series, which aired in November 2010. AMD also suffered from part shortages -- its
high end Radeon HD 6990 GPU-- the most powerful single-slot solution on the market today -- has been virtually entirely out of stock since April.
NVIDIA is preparing its Kepler architecture (28 nm) for a Q4 2011 launch. Products with Kepler chips will presumably be branded GeForce 6xx GPUs. AMD has promised to release its own next generation CPUs Southern Islands (28 nm), in H2 2011, so it could presumably get the jump on its competitor. Southern Islands will presumably be branded the Radeon 7xxx series.
Southern Islands, which contains both a die shrink and a new graphics core design, is currently in mass production, so AMD seems to be doing pretty good currently.
No one knows where AMD and NVIDIA currently sit in market share. The
best numbers on hand come from back in May, which put AMD at 40.5 percent of discrete GPU sales and NVIDIA at 59.6. This is a reversal from 2010, when AMD
briefly took the lead in sales from NVIDIA.
While AMD may now be back to playing catch up, discrete sales are only a part of the value equation of the GPU unit to AMD. The great sales of Fusion are largely only thanks to AMD's GPU expertise, which it acquired when it purchased ATI Technologies.
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