AMD Q3 Revenue Falls Due to Weak PC Market

The chip maker lost $197 million and revenue dropped 26 percent as demand for Windows 10 PCs is weaker than expected.


Advanced Micro Devices officials continue to talk about the industry segments they're pushing into to bring the chip maker back to profitability, from data center servers to gaming systems to immersive systems. And every 90 days the company shows just how tied it still is to the struggling PC space.

AMD over the past few months has rolled out new graphics cards featuring the new High-Bandwidth Memory (HBM) technology, new Pro A-Series mobile and desktop business processors (formerly codenamed "Carrizo Pro" and "Godavari Pro"); created the new Radeon Technologies Group, and highlighted customer wins, including being the exclusive partner for Hewlett-Packard's EliteBook commercial systems, which will be powered by the Pro A-Series chips.

On Oct. 15, AMD officials announced that the company lost $197 million in the third quarter, with revenues hitting $1.06 billion, a 26 percent drop over the same period in 2014. Taking the brunt of it was the company's Computing and Graphics business, which lost $181 million and saw revenues fall 46 percent year-over-year. The unit also was hit by a $65 million write-down of older processors, as well as by falling CPU prices, though GPU prices increased.

One of the challenges was that in a global PC market that saw shipments drop between 7.7 percent and 10.8 percent, according to Gartner and IDC analysts, sales of systems with the new Windows 10 operating system from Microsoft weren't as strong as AMD officials had expected.

"PC demand continued to be somewhat muted," AMD CEO Lisa Su said during a conference call with analysts and journalists.

The company's Enterprise, Embedded and Semi-Custom segment, which serves many of the growth markets where AMD is looking to expand, saw revenues fall 2 percent, though Su said she was encouraged by expected increased demand for AMD-powered game consoles from Microsoft and Sony during the upcoming holiday season.

Su also talked about some of the chip maker's plans for 2016 and 2017, including the expected ramp of sales of commercial PCs armed with AMD's Pro A-Series chips; the "Zen" x86 core design that is scheduled for production release next year and revenue ramp in 2017, and efforts to better monetize the company's patent portfolio. She said she is "very bullish" on the graphics business, and that while AMD also is continuing to develop the "Seattle" ARM-based chip for servers, the focus on the data center is the Zen architecture.

"We are extremely committed to high-performance x86 CPUs," Su said.

AMD executives also announced that the company had entered into a joint venture with Nantong Fujitsu Microelectronics that will combine AMD's two automated manufacturing and test facilities in China with Nantong Fujitsu, which will own 85 percent of the operation. The will give AMD $317 million in much-needed cash. About 1,700 workers at the AMD factories will become employees of the joint venture.

AMD officials also hope to save money over the next year through a restructuring effort announced earlier this month that includes cutting another 500 jobs. Though the company will take a $42 million restructuring charge, it expects to save a combined $9 million in costs in the third and fourth quarters, and another $58 million in 2016.

The company also has been hit with some high-level defections. Jim Keller, the chief chip architect behind the development of Zen, left the company to pursue other opportunities, ending his second stint with the processor maker. Weeks later, Phil Rogers, an AMD Fellow and one of the drivers of the company's heterogeneous computing strategy, left AMD to join rival Nvidia as its computer server architect.