AMD in the red again as sales are down 26 percent, SeaMicro division gets axed

AMD's first-quarter financial result were published Thursday evening out and they aren't pretty, not only is the firm back in the red but its revenue is also shrinking at an alarming rate. First quarter sales came in at only $1.03 billion, 26 percent less than the same period the year before. On a GAAP basis, AMD reported a net loss of $180 million, or 23 cents per share, while the non-GAAP numbers, which exclude "one time" items, show a net loss of $73 million, or 9 cents per share.

Despite the poor results, AMD CEO Dr. Lisa Su tries to reassure investors that AMD is on the right track:

“Building great products, driving deeper customer relationships and simplifying our business remain the right long-term steps to strengthen AMD and improve our financial performance,” said Dr. Lisa Su, AMD president and CEO. "Under the backdrop of a challenging PC environment, we are focused on improving our near-term financial results and delivering a stronger second half of the year based on completing our work to rebalance channel inventories and shipping strong new products.”

Revenue from the computing and graphics segment, which includes the firm's consumer CPU/APU and GPU products, is down 20 percent versus the quarter before and 38 percent from Q1 2014. AMD attributes its poor sales to low demand for its products, the sequential decrease was primarily due to lower desktop and notebook CPU sales, while the yearly decrease is the result of poor demand for AMD's GPUs and desktop CPUs.

The enterprise, embedded and semi-custom group, which includes all server and console chips, also saw a big drop in sales. The revenue of this segment decreased 14 percent sequentially, due to seasonally lower sales of the semi-custom SoCs, while the year-over-year decrease of 7 percent is attributed to lower server processor sales.

One of the other stunners in the earnings release is the decision to axe the SeaMicro division to simplify the company's investment focus. AMD explains SeaMicro's interconnect fabric technology will remain part of its IP portfolio but they will exit the dense server market effective immediately. Looks like this was a very expensive mistake for AMD as the company bought microserver maker SeaMicro in 2012 for $334 million but after that we heard very little on that front. The closure of this division resulted in a $75 million writedown in Q1 2015.

Things aren't expected to get better in the near-term, AMD expects Q2 2015 revenue will decrease 3 percent, plus or minus 3 percent, sequentially. AMD shares fell 10.28 percent to $2.58 on Friday.