AMD Second Quarter Buoyed by Xbox One, PlayStation 4 Consoles

AMD officials say sales of the gaming systems boosted the company's quarterly numbers, while its compute and graphics chip revenues declined.

AMD gaming consoles

Advanced Micro Devices is continuing to reap the benefits of having its processors in all three of the major game consoles.

AMD officials reported July 17 that its Graphics and Visual Solutions business saw revenues in the second quarter jump 141 percent over the same period last year, driven in large part by sales of Microsoft's Xbox One, Sony's PlayStation 4 and Nintendo's Wii U game consoles. In a conference call with analysts and journalists to discuss the company's second-quarter financial numbers, the executives also said that they expect even better results from AMD's semi-custom chip business in the third quarter, as the three console vendors ramp to get to get ready for the holiday season at the end of the year.

AMD's strength in its semi-custom chip business is turning out to be hugely important as the chip maker is seeing its other businesses struggle. According to numbers the company released, AMD saw revenues in its Computing Solutions business tailed off 20 percent over the same period in 2013, to $669 million, while sales in its graphics unit outside of consoles also fell.

The Computing Solutions group was hurt by declining shipments of processors, with executives saying that increased sales of notebook chips were offset by fewer desktop processors being sold.

Overall, AMD in the second quarter saw revenues grow more than 24 percent, to $1.44 billion, while coming into a net loss of $36 million.

CEO Rory Read noted both the boom business in game consoles and the struggles in a PC market that, while stabilizing, it still being hindered by the popularity of tablets and smartphones.

"The overall PC market has shown signs of improvement, largely driven by the commercial refresh cycle" and Microsoft's decision to end support for the aged Windows XP operating system in April, Read said. "However, the consumer market remains under pressure, and we expect the overall PC market is going to continue to be down by 5 percent to 7 percent for the year 2014."

AMD did not get the same kind of boost from the PC market that rival Intel received. Intel officials earlier in the quarter said that demand for PCs was higher than expected, and on July 15 announced that revenues for its PC business in the second quarter increased 6 percent over the same time last year. In addition, they not only saw strong growth in commercial PCs, but also increasing interest in the consumer PC space.

However, Read and other AMD officials were optimistic about what lay ahead, noting the recent releases of the company latest "Beema," "Mullins" and "Kaveri" accelerated processing units (APUs) for desktops and notebooks, with new systems rolled out by such vendors as Acer, Hewlett-Packard, Lenovo and Dell, and more designs on the way. Read said the strength in the PC market now is in the commercial space, and noted that AMD is still overly reliant on consumer systems. However, that will change, he said.

"HP has already announced a full range of elite commercial offerings powered by AMD and other OEMs will begin rolling out AMD-powered commercial offerings this quarter," he said.

AMD also is continuing to make strides to diversify its product portfolio by expanding into a number of growth areas, including ultraportable systems, dense servers, the embedded space and semi-custom chips. About 40 percent of its revenues will come from these new areas, Read said, adding that by the end of 2015, that number will be up to 50 percent.

Read also said that revenues in dense servers for the first six months of 2014 more than doubled when compared with last year, and that the company was on track to release its 28-nanometer ARM-based Opteron A1100 "Seattle" chip by the end of the year.

Read and Lisa Su, senior vice president and COO, also said that the semi-custom chip business, while bolstered by the game console sales, also will be announcing one or two more design wins this year, though they declined to give details on the potential deals. Still, Su said that while gaming has been a strong segment for the semi-custom business segment, there also has been interest from other industries, including mobile and networking.

For the current quarter, AMD officials said they expect revenues to increase 2 percent over the second quarter.