AMD disappoints as net loss increases to $364 million

While Intel keeps posting record quarters, AMD's financial continue to be a complete mess as the company just announced a fourth-quarter net loss of $364 million, or 47 cents per share, on revenue of $1.24 billion.

Excluding everything that's deemed to be "one-time items", non-GAAP net income came in at $2 million, essentially 0 cents per share, missing analyst expectations by one cent per share while revenue was in-line with expectations. Most of the difference between the GAAP and non-GAAP figures comes from a $233 million goodwill impairment charge and $71 million in restructuring charges.

The fourth quarter shows there's still significant work to be done to get AMD back on track, it was the worst quarter for AMD in quite some time. Revenue was down 13 percent versus the previous quarter and 22 percent year-over-year and GAAP and non-GAAP net income deteriorated significantly.

In its earnings statement, AMD explains revenue from computing and graphics was down 15 percent versus Q3 2014 on weak sales of desktop processors and chipsets. Aditionally, revenue of enterprise, embedded and semi-custom chips declined 11 percent versus the previous quarter due to lower sales of semi-custom SoCs (the ones AMD suppplies to the console makers). Exact figures on how the CPU and GPU business are doing can no longer be found in AMD's earning statement.

For the year 2014, AMD posted a revenue of $5.51 billion with non-GAAP net income of $51 million. For a sense of scale, Intel announced revenue of $55.9 billion for 2014 with net income of $11.7 billion. Those results even mask the fact that Intel ran its mobile division at a $4.21 billion loss to capture marketshare in the tablet/smartphone markets.

Unfortunately, better times aren't in sight any time soon. AMD expects Q1 2015 revenue will be down 15 percent, plus or minus 3 percent, versus Q4 2014.

AMD shares first sharply declined in after-hours trading but have since recovered to $2.24. Since the start of last year, AMD shares are down over 40 percent as investors have lost faith in the company's future.

AMD (NASDAQ:AMD) today announced revenue for the fourth quarter of 2014 of $1.24 billion, operating loss of $330 million and net loss of $364 million, or $0.47 per share. Non-GAAP1 operating income was $36 million, non-GAAP1 net income of $2 million and breakeven non-GAAP1 earnings per share.

"We made progress diversifying our business, ramping design wins and improving our balance sheet this past year despite challenges in our PC business," said Dr. Lisa Su, AMD president and CEO. "Annual Enterprise, Embedded and Semi-Custom segment revenue increased over 50% as customer demand for products powered by our high-performance compute and rich visualization solutions was strong. We continue to address channel headwinds in the Computing and Graphics segment and are taking steps to return it to a healthy trajectory beginning in the second quarter of 2015."

2014 Annual Results

Revenue of $5.51 billion, up 4 percent year-over-year.

Gross margin of 33 percent, down 4 percentage points year-over-year and non-GAAP1 gross margin of 34 percent, down 3 percentage points year-over-year.

Operating loss of $155 million and non-GAAP1 operating income of $235 million, compared to GAAP and non-GAAP1 operating income of $103 million in 2013.

Net loss of $403 million, loss per share of $0.53, and non-GAAP1 net income of $51 million, non-GAAP1 earnings per share of $0.06, compared to a GAAP and non-GAAP1 net loss of $83 million, loss per share of $0.11 in 2013.

Q4 2014 Results

Revenue of $1.24 billion, down 13 percent sequentially and 22 percent year-over-year.

Gross margin of 29 percent and non-GAAP1 gross margin of 34 percent. Gross margin was down 6 percentage points sequentially, primarily due to lower of cost or market inventory adjustment of $58 million related to our second-generation APU products. Non-GAAP1 gross margin was down 1 percentage point sequentially. Q3 2014 gross margin of 35 percent included a $27 million, or 2 percent, benefit from revenue related to technology licensing.

Operating loss of $330 million and non-GAAP1 operating income of $36 million, compared to operating income of $63 million and non-GAAP1 operating income of $66 million in Q3 2014.

Net loss of $364 million, loss per share of $0.47, and non-GAAP1 net income of $2 million, breakeven non-GAAP1 earnings per share, compared to net income of $17 million, earnings per share of $0.02 and non-GAAP1 net income of $20 million, non-GAAP1 earnings per share of $0.03 in Q3 2014.

Cash, cash equivalents and marketable securities were $1.04 billion at the end of the quarter, up $102 million from the end of the prior quarter.

Total debt at the end of the quarter was $2.21 billion, flat from the prior quarter.

Financial Segment Summary

Computing and Graphics segment revenue decreased 15 percent sequentially and 16 percent from 2013. The sequential decrease was primarily due to lower desktop processor and GPU sales, and the annual decrease was driven by lower desktop processor and chipset sales.

Operating loss was $56 million, compared with an operating loss of $17 million in Q3 2014 and operating loss of $15 million in Q4 2013. The sequential and year-over-year decreases were primarily driven by lower channel sales partially offset by lower operating expenses.

Client average selling price (ASP) increased sequentially and year-over-year primarily driven by a richer mix of notebook processor sales.

GPU ASP increased sequentially primarily due to higher desktop and notebook GPU ASPs and decreased year-over-year primarily due to a lower channel ASP.

Enterprise, Embedded and Semi-Custom segment revenue decreased 11 percent sequentially primarily driven by lower sales of semi-custom SoCs. Annual revenue increased 51 percent from 2013 primarily driven by increased sales of semi-custom SoCs.

Operating income was $109 million compared with $108 million in Q3 2014 and $129 million in Q4 2013. The year-over-year decrease was primarily due to lower sales of semi-custom SoCs.

All Other category operating loss was $383 million compared with $28 million in Q3 2014 and operating income of $21 million in Q4 2013. The sequential and year-over-year decreases are primarily due to a $233 million goodwill impairment charge, $71 million restructuring and other special charges, net and a $58 million lower of cost or market inventory adjustment.

Current Outlook
AMD’s outlook statements are based on current expectations. The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Cautionary Statement” below. For Q1 2015, AMD expects revenue to decrease 15 percent, plus or minus 3 percent, sequentially.