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AMD Sinking Under Hurricane of Bad News

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News Posted: Thu, Oct 18 2012 5:08 PM
Grim tidings abound at AMD this quarter, confirming some of our worst fears and raising serious questions about the company's ability to continue as a going concern. Revenue for the quarter was $1.27 billion, a decrease of 10% sequentially and 25% year-on-year. The company reported a net loss of $157M and has announced a new restructuring (read: massive layoffs) plan. The company's gross margin plummeted to 31%, down from 45% last quarter.

The decline in gross margin was driven by an inventory write-down on the value of the unsold hardware AMD was carrying at the end of Q2. Despite this, AMD's inventory levels remain worryingly high. The company is currently sitting on $744M of unsold hardware, down $89M from Q2, but up 56% from inventory levels at the end of 2011. Graphics sales were down somewhat in Q3, falling to $342M with an operating income of $18M. GPU revenue fell 15% year-on-year.




Finally, and worst of all, AMD has announced another round of layoffs. The company plans to fire about 15% of its workforce. Based on what we've heard from sources, those cuts are going to hit Canada hard -- Markham, where the old ATI division and Radeon engineers are located, is rumored to be in the crosshairs. It's not clear, yet, whether AMD plans to take the axe to chipset development or Radeon engineering, but those are the two divisions that primarily work out of the Great White North.

We've updated this story with results from the conference call. The PR released thus far is notable for what it doesn't mention. No word on Kaveri's tape-out, Kabini's launch, the HD 8000 series, or any other product launches farther than a few weeks out. Rory Read claims he has a plan in place to bring the company profitable with a $1.3B sales target -- but claims he won't reach this goal until Q3 2013. With AMD's stock trading at half the value it held a year ago, and down nearly 75% from the Bobcat launch period in January, 2011, it's not clear how long it will take the company to put things in order.

Post Conference Call:

AMD's conference call ran nearly 90 minutes and offered precious little optimism. Revenue for Q4 is expected to be down a further 10%. Read point-blank admitted that AMD has no chance of competing with Intel and stated that he'll be accelerating AMD's transition to other product categories.

The Good:
  • Kabini (Brazos' follow-up) is expected to launch in the first half of the year.
  • Embedded APUs (consoles) are expected to be a much higher percentage of AMD's revenue by this time next year; up to 20% from 5% currently.
  • AMD is building "Third party cores" (read: ARM chips) into Seamicro boxes to target the dense server space. These efforts won't hit market until 2014.

The Bad:

  • No mention of Kaveri, Steamroller, or any future Opteron parts. 
  • Graphics is performing "at expectations," but Read offered no information on how GPU development will be impacted by these layoffs or when we'll see the HD 8000 family launch. 
  • Much talk of "re-using IP blocks." The problem with this argument is that while it makes sense from a cost perspective, every other company is falling all over itself to design custom IP blocks to differentiate products and achieve minimal power consumption. 
  • Read predicted no relief from the beating AMD is taking from Intel. 

I've got some more thoughts to share on this topic, but I'm waiting to see exactly how the axe swings before I say more. This is an exceptionally bad situation for the company.

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CDeeter replied on Thu, Oct 18 2012 6:04 PM

Damn this sucks. BAD!

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I want them to do well. I really do, but intel is just doing so much better, and Nvidia has been doing very well on the fields that used to make AMD the better choice, as well.

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MCook replied on Thu, Oct 18 2012 8:08 PM

"Kabini (Brazos' follow-up) is expected to launch in the first half of the year."

Don't they mean 2013? We're well into in the 2nd half of this year ;)

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3vi1 replied on Thu, Oct 18 2012 8:18 PM

Damn... I don't often buy AMD products, but I wish they were doing better. It is only their competition that makes Intel and nVidia excel. :(

Hopefully, these problems are overstated. Numbers don't mean anything if your engineers are about to rock the industry with a new level of performance.

What part of "Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn" don't you understand?

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realneil replied on Thu, Oct 18 2012 8:37 PM

AMD is necessary in the market and I buy from them whenever I can. (an FX-4170 and 2 HD-7770s lately)

Without them around we would be paying a lot more for CPUs and graphics cards.

I still buy Intel CPUs and plan to get a few GTX-660Ti cards soon, but I wish success for AMD in the future.

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Joel H replied on Thu, Oct 18 2012 9:52 PM

3vi1,

That's not going to happen. If it was, Read would be talking.

Right now, AMD has two CPU families. Piledriver (2nd gen Bulldozer) comes out for servers and desktops in the very near future. We already know the shape of PD's performance. It's better than BD -- but not that much.

With Kabini, AMD is claiming a 15% CPU performance improvement over Brazos. That's solid. But Kabini is forecast for 1H 2013. Kaveri (3rd gen BD) has no launch date at all, not even 2H 2013.

There's no miracle coming.

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63jax replied on Fri, Oct 19 2012 10:38 AM

the board directors are destroying AMD

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This stinks. As consumers, we need AMD to push Intel and Nvidia. I hope AMD can turn things around in the next couple of years.

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ECouts replied on Sun, Oct 21 2012 10:22 AM

Honestly, AMD needs to put some thought into their hardware before they launch it. This newest CPU they released was a joke at best. And if they're going to crossfire hardware, they need to do so in a manner that newer hardware is backwards compatible with older hardware and will allow for seamless upgrades. Instead, they made this newest CPU compatible with last year's hardware and isn't trying to push forward as much as they are backwards. The restructuring doesn't need to be done in the lower staff as much as the upper staff who designs this crap.

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realneil replied on Sun, Oct 21 2012 7:39 PM

ECouts:
AMD needs to put some thought into their hardware before they launch it.

I like the 'thought' that I will not need to replace my ASRock 990FX Extreme4 if I want to upgrade to this new CPU.

With Intel's newest offerings a new board is required, jacking our costs significantly.

The FX-8350 (if it reviews well) would be a good upgrade from my FX-4170.

 

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