AMD posts worse than expected third-quarter loss of $136 million

Posted on Thursday, Oct 15 2015 @ 22:36 CEST by Thomas De Maesschalck
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AMD announced third quarter revenue of $1.06 billion, an increase of 13 percent versus the previous quarter but a strong decline versus last year's $1.43 billion. Excluding one-time items, the company's net loss came in at $136 million, or 17 cents per share, versus analyst expectations of a loss of 12 cents per share. Things aren't going to get better next quarter as AMD expects fourth-quarter revenue will be down 10 percent, plus or minus 3 percent, sequentially.

During the third-quarter, AMD took a $65 million inventory write-down, primarily on the value of older-generation APUs, and burned through $74 million of its cash reserve. AMD now has $755 million in cash in hand, and total debt of $2.26 billion.

AMD attributes the sequential revenue increase due to solid console chip sales and strong desktop CPU and GPU sales. Sales of the Computing and Graphics segment increased 12 percent quarter-over-quarter, but are down 46 percent year-over-year.

The company also announced a Assembly, Test, Mark and Pack (ATMP) manufacturing joint-venture, more about that in the next post.
AMD (NASDAQ: AMD) today announced revenue for the third quarter of 2015 of $1.06 billion, operating loss of $158 million, and net loss of $197 million, or $0.25 per share. Non-GAAP operating loss was $97 million and non-GAAP(1) net loss was $136 million, or $0.17 per share. GAAP and non-GAAP results include a $65 million inventory write-down and the impact of this charge to loss per share was $0.08.

"AMD delivered double-digit percentage sequential revenue growth in both of our segments in the third quarter," said Dr. Lisa Su, AMD president and CEO. "We continue to take targeted actions to improve long-term financial performance, build great products and simplify our business model. The formation of a joint venture of our back-end manufacturing assets is a significant step towards achieving these goals and strengthening our balance sheet."

Q3 2015 Results
  • Revenue of $1.06 billion, up 13 percent sequentially and down 26 percent year-over-year. The sequential increase was due to solid seasonal semi-custom and strong desktop processor and GPU sales. The year-over-year decline was primarily due to decreased sales in the Computing and Graphics segment.

  • Gross margin of 23 percent, down 2 percentage points sequentially, due to an inventory write-down of $65 million. Non-GAAP(1) gross margin, including the impact of the inventory write-down was 23 percent, down 5 percentage points sequentially. The inventory write-down was due to lower anticipated future demand for older-generation APUs. The gross margin impact of the inventory write-down was 6 percentage points.

  • Operating loss of $158 million, compared to an operating loss of $137 million for the prior quarter. Non-GAAP(1) operating loss of $97 million, compared to non-GAAP(1) operating loss of $87 million in Q2 2015, primarily due to lower gross margin.

  • Net loss of $197 million, loss per share of $0.25, and non-GAAP(1) net loss of $136 million, non-GAAP(1) loss per share of $0.17, compared to a net loss of $181 million, loss per share of $0.23 and non-GAAP(1) net loss of $131 million, non-GAAP(1) loss per share of $0.17 in Q2 2015. The impact of the inventory write-down to EPS was $0.08.

  • Cash and cash equivalents were $755 million at the end of the quarter, down $74 million from the end of the prior quarter, due primarily to a $69 million debt interest payment. Total debt at the end of the quarter was $2.26 billion, flat from the prior quarter.

    Financial Segment Summary
  • Computing and Graphics segment revenue increased 12 percent sequentially and decreased 46 percent from Q3 2014. The sequential increase was primarily due to higher sales of desktop processors and GPUs and the annual decrease was driven primarily by lower client processor sales.

  • Operating loss was $181 million, compared with an operating loss of $147 million in Q2 2015 and an operating loss of $17 million in Q3 2014. The sequential change was primarily driven by an inventory write-down of older-generation products partially offset by higher revenue. The year-over-year change was primarily driven by lower sales.

  • Client processor average selling price (ASP) decreased sequentially and year-over-year primarily driven by lower notebook processor ASP.

  • GPU ASP was flat sequentially and increased year-over-year. The year-over-year change was due to new GPU product offerings and improved AIB ASP.

  • Enterprise, Embedded and Semi-Custom segment revenue increased 13 percent sequentially, primarily driven by seasonally higher sales of our semi-custom SoCs. The year-over-year decrease of 2 percent was primarily driven by lower embedded product and server processor sales.

  • Operating income was $84 million compared with $27 million in Q2 2015 and $108 million in Q3 2014. The sequential increase was primarily due to the absence of the $33 million charge associated with a technology node transition in Q2 2015 and higher sales. The year-over-year decrease was primarily driven by a portion of the Q3 2015 inventory write-down and product mix.

  • All Other category operating loss was $61 million compared with operating losses of $17 million in Q2 2015 and $28 million in Q3 2014. The sequential and year-over-year increases were due to restructuring charges recorded in Q3 2015.

    ATMP Manufacturing Facilities Joint Venture
    As a part of AMD's ongoing strategic plan to sharpen its focus on designing high-performance technologies and products that drive profitable growth, AMD today announced the signing of a definitive agreement to create a joint venture with Nantong Fujitsu Microelectronics (NFME) that combines AMD's high-volume ATMP facilities and experienced workforce in Penang, Malaysia and Suzhou, China with NFME's established outsourced semiconductor assembly and test (OSAT) expertise to offer differentiated capabilities and scale to service a broad range of customers. The value of the transaction is $436 million and NFME will take an 85 percent ownership of the joint venture. AMD will receive $371 million in cash and expects net proceeds of approximately $320 million, net of taxes and other charges at close. This transaction is expected to close in the first half of 2016, pending successful completion of regulatory approvals.

  • About the Author

    Thomas De Maesschalck

    Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.

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