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Advanced Micro Devices executives, despite a second quarter that saw revenues fall and a net loss of $74 million, are upbeat about the second half of the year.
In a conference call with analyst and journalists July 18 to talk about the second-quarter financial numbers, CEO Rory Read said the company’s efforts to expand into new growth areas were taking hold, and that he expected AMD will return to profitability in the current quarter.
With the company now past a painful restructuring, officials are focusing on new products and strategies that already are beginning to bear fruit, Read said. AMD in the second quarter rolled out a range of new accelerated processing units (APUs) aimed at the traditional PC market as well as emerging form factors, including ultrathins and tablets. The company’s growing semi-custom chip business grabbed significant wins in the gaming console market, including Microsoft’s upcoming Xbox One and Sony’s PlayStation 4. Last year Nintendo said it would use AMD chips in its Wii U device.
In the data center, AMD is rolling out x86-based Opterons for traditional servers as well as the burgeoning dense microserver market, where the chip maker also can leverage its SeaMicro technology. In addition, starting in 2014, AMD also will make chips based on designs from ARM, giving OEMs a range of choices.
For AMD, these new growth markets—from dense servers and ultra low-power clients to professional graphics and embedded systems—will account for 40 to 50 percent of the company’s revenue in the next two to three years, according to Read. That will lessen AMD’s reliance on the traditional PC market, which continues to see sales fall worldwide as customers spend more of their money on tablets and smartphones.
PCs will still be important to the company, but its share of AMD’s revenues will shrink. AMD officials expect the custom-chip and embedded businesses to account for 20 percent of the company’s revenues in the fourth quarter.
“Looking at the second half of the year, we believe we have good opportunities for growth based on the PC market strengthening slightly from first half levels and the ramp of our semi-custom business,” Read said during the conference call. “Longer term, the 300 million-plus-unit traditional PC market remains an important part of our core business, especially as the mainstream $300 to $600 dollar system price points that have traditionally been our sweet spot become an even larger portion of the overall market.”
AMD released its second-quarter numbers the day after larger rival Intel did the same. Like AMD, Intel saw its financial numbers hit hard by the rapidly declining global PC market. And like their counterparts at AMD, Intel officials saw better days ahead as the company accelerates into new markets, such as the mobile chip space current dominated by ARM and its partners, including Qualcomm, Samsung and Nvidia.
AMD Optimistic About Future Despite Tough Q2
Despite the positive outlook—the company’s revenue forecast for the current quarter is about 22 percent over the second quarter, or about $1.42 billion—Read and other executives had to address the previous three months, which saw shipments and average selling prices of its core chips business decline and revenues fall by about 20 percent.
The $1.16 billion in overall revenues represented an 18 year decline over the same quarter last year, and the $74 million loss compares with the $37 million in profits the company gained in the same period in 2012.
Read and other executives said they expect the new APUs for PCs, ultrathins and tablets—codenamed “Kabini,” “Temash” and “Richland”—will boost adoption of AMD products by OEMs, due in large part to improvements in performance, graphics capabilities and power efficiency.
Responding to a question regarding AMD’s market position with Kabini and Temash over Intel’s upcoming low-power “Bay Trail” Atom systems-on-a-chip (SoCs) for tablets and other form factors, Lisa Su, senior vice president and general manager of AMD’s Global Business Unit, said it was good to have a head start.
“If you look at our Temash and Kabini offerings, I think we are very pleased with overall performance both on the processing side and the graphics side and the adoption through the OEMs,” Su said. “We do have the time to market advantage and that proves good when you look at on the systems that will be on the shelf both starting this quarter and into the summer. And as we go forward, we think we are well positioned versus Bay Trail as well.”
She also said there was room in the data center for both chips based both on the x86 architecture and ARM’s designs, and that AMD’s ability to offer both will be an advantage starting next year.
“We view ARM and x86 as two important eco-systems that are out there in the industry,” Su said. “So x86 will always continue to be very important in both the PC and the server market, but we see ARM being important with the new markets, especially new operating systems as well as some of the high-volume data center applications. So, yes, there will be a market for both ARM and x86, and I think that’s one of the unique things that we can bring over the next few years to the marketplace.”