AMD Suffers Through Difficult 2015 but Remains Optimistic

The company in Q4 continued to pile up losses and revenue declines, but CEO Su says AMD's strategy will result in profits and gains in market share.


Advanced Micro Devices has a lot of moving parts, from a rapidly expanding graphics division and new processors for business PCs to the newly launched ARM-based server chips, an upcoming new x86 core architecture and new wins for its custom chip business that will come later this year.

They're all part of a larger effort laid out almost a year ago by CEO Lisa Su and other AMD executives to turn the company around and return it to sustainable profitability.

That said, the company also is competing against top-tier rivals Intel and Nvidia, is being banged around by the contracting PC space and now, like Intel and others, is faced with macroeconomic issues in China, an important tech market.

Some of those issue dogged AMD throughout 2015, including the last three months of the year. AMD officials on Jan. 19 reported that during the fourth quarter, the company's revenue hit $958 million, a drop from the $1.24 billion in revenue during the same period of 2014. However, the chipmaker's loss for the quarter narrowed, to $49 million, from $330 million a year earlier. For all of 2015, AMD's revenue came in at $3.99 billion, a drop from $5.51 billion of the year before. For the year, AMD lost $481 million, more than the $155 million it had lost in 2014.

Seasonally lower shipments of semicustom systems on a chip (SoCs) were partially offset by a second consecutive quarter of double-digit percentage revenue growth in the company's computing and graphics business, according to Su.

The outlook for the current quarter promises more of the same. AMD officials are expecting revenue to fall 14 percent over the fourth quarter.

The fourth quarter was one in a string of difficult financial periods for AMD, which for several years has been trying to find its financial footing in a rapidly changing industry and against strong, well-financed competitors. During a conference call with analysts and journalists, Su acknowledged that 2015 was not an easy year, but continued to stress the long-term plans and goals the company has laid out, which she is confident will result in growing market shares and a stronger financial position.

The goal is to return to profitability in the second half of the year, she said.

"While 2015 was a challenging year from a financial perspective, the dedicated commitment of our employees, combined with our long-term technology investments and sharpened focus, have created a strong foundation for future growth," Su said.

AMD in 2015 made a number of significant moves, including in its graphics business. The chip maker has created a business unit for its Radeon graphics technology, expanded its software capabilities, and earlier this month unveiled Polaris, the fourth generation of AMD's Graphics Core Next initiative built via a 14-nanometer FinFET manufacturing process for improved performance and power efficiency. The graphics business saw revenue grow 11 percent over the third quarter, and represents AMD's strongest play going into this year, according to Patrick Moorhead, principal analyst with Moor Insights & Strategy.

"For 2016, AMD's biggest opportunity is in the graphics space with Polaris," Moorhead wrote in an email to eWEEK. "AMD lost share to Nvidia in 2015, and Polaris looks to be AMD's strongest offering in at least five years. AMD will need to really work on its graphics software, and AMD is hoping that GPUOpen is the key here. Time will tell."

AMD's new "Zen" chip architecture will also be making its debut later this year. Intel owns more than 95 percent of the PC chip market, giving AMD a lot of opportunity to steal share, Su said. The company's continued push into the commercial market will help, as will the rollout in late 2016 of its Zen-based "Summit Ridge" CPU, which will mark AMD's re-entrance into the high-performance desktop space.

Zen, which officials said will bring significant performance and energy efficiency gains, also will begin appearing in server CPUs, with an expected ramp-up in new products in 2017. The new chip architecture will be important to AMD's future, Moorhead said.

"Zen may be coming out in 2016 and will most likely be [AMD’s] key to success for the long haul, but it won't see a lot of volume until 2017," the analyst wrote.