AMD Looks to New Markets After Restructuring

The chip maker, which saw revenue fall 31 percent, said new chips this year will help it in such areas as tablets, hybrids and game consoles.

Advanced Micro Devices officials have completed the restructuring of the chip maker and are expecting the company to return to profitability in the second half of the year, but admit they are still dealing with a difficult PC market.

Like larger rival Intel, AMD is looking to expand its silicon into new markets, with executives pointing to game consoles, embedded devices and new computing form factors as examples. At the same time, the company is pushing its semi-custom chip business as a way of attracting systems makers who are under pressure to develop those new computing device form factors and are looking for custom chips to put into them.

However, the officials admit that the company—again like Intel—is still being dogged by a global PC market that is contracting as consumers and businesses opt to buy more mobile computing devices such as smartphones and tablets.

AMD in the first quarter of 2013 generated $1.09 billion in revenue, a 31 percent drop from the same period in 2012 but reportedly less than what financial analysts had predicted. Company officials are projecting second-quarter revenue to grow 2 percent, compared with the first quarter. AMD also had a net loss of $146 million in the first quarter.

Like Intel and other IT vendors with deep ties to the PC industry—such as Dell and Hewlett-Packard—AMD has been hurt by the continuing drop in PC sales worldwide. The company's Computing Solutions unit saw revenue in the quarter drop 9 percent, due primarily to falling desktop, notebook and chipset shipments.

In response, AMD since last year has worked to transform its business to lessen its reliance on PCs. The company is cutting 10 percent of its workforce and focusing its efforts in several areas, including low-power computing devices—such as tablets and low-power notebooks—dense and energy-efficient servers, the embedded device space and semi-custom chips.

However, in a conference call April 18 to discuss the company's first-quarter numbers, CEO Rory Read said that while the PC market is contracting, there are still more than 360 million that are shipped every year and they will continue to be important to AMD.

"The PC market will remain an important business for AMD for years to come," Read said. "The PC is far from dead."

What's happening is that other form factors also are coming to the fore, and AMD needs to have products that meet the demand for them. Read and Lisa Su, senior vice president and general manager of AMD's global business units, boasted of the lineup of chips that AMD has coming this year. Read said AMD has begun shipping the next generation of low-power accelerated processing units (APUs), code-named Kabini, that are aimed at low-cost PCs as well as convertible and hybrid devices—systems that can work as both a notebook and a tablet.

In March, AMD unveiled the first of its Elite A-Series chips—dubbed Richland—for notebooks and tablets. Later this year, AMD will roll out "Temash," low-power APUs aimed at Windows 8-based tablets and hybrids.

"Kabini and Richland will be AMD's volume play, but Temash will be interesting," Su said, adding that while the product lineup is strong, the key for AMD will be executing on the road map.

Read said the market for computing devices is shifting away from "proprietary, controlled equipment"—such as traditional PCs—to an era highlighted by "an explosion, a tsunami of devices" that is hitting the market and demanding more dynamic and customizable silicon. OEMs are not just looking for chip makers to offer products, but for them to be partners in developing devices that can help them differentiate from the competition. That's where AMD's semi-custom chip business will grow, he said.

In addition, the game console space will be increasingly important to AMD in both its chips and graphics technology, particularly as the devices increasingly go from being used for video games to also being used for such tasks as streaming video and music. Earlier this year, Sony announced it was using a semi-custom APU from AMD—which combines AMD "Jaguar" processor cores and Radeon graphics—for its upcoming PlayStation 4 console.

AMD also made other moves in the gaming industry, including unveiling TressFX Hair—the result of a collaboration with Chrystal Dynamics to create hair-rendering technology for games that can react to such forces as gravity, wind and head movements—and Radeon SkyGraphics, a cloud gaming technology that enables developers and service providers to deliver games with improved user experience via PCs, tablets, smart TVs and mobile devices.