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Consoles can’t keep AMD a profitable company

Revenue from PS4 and Xbox One sales boost AMD’s revenues by 28 percent, but the company ended up with a $20 million loss in the first quarter of 2014.


Despite optimism from AMD executives that revenues from putting its SoCs in game consoles, amongst other diversification, would help return it to sustained profitability, the company’s first quarter of 2014 earnings results seemed to have shattered that dream.

Late Thursday AMD reported a loss of $20 million on revenue of $1.4 billion for the first quarter of the 2014 fiscal year, versus a loss of $146 million on revenue of $1.09 billion for the same time last year. This 28 percent increase in revenue beat most expectations, as analysts polled by Thomson Reuters had expected revenue of $1.34 billion.

“AMD continued our momentum by building on the solid foundation we set in the second half of 2013, further transforming the company,” said Rory Read, AMD’s president and chief executive, in a press release. “We are well positioned to continue to grow profitably as we diversify our business and enable our customers to drive change and win.”

Looking at AMD’s individual business units, its Computing Solutions segment posted a loss of $3 million on revenue of $663 million — down 12 percent from the same time last year as the PC market continues to decline. In contrast, revenue from the company’s Graphics and Visual Solutions segment jumped 118 percent to hit $734 million and posted earnings of $91 million. AMD chalks this jump up to income from console royalties and a strong demand for the Radeon R7 and R9 largely due to cryptocurrency mining.

Removing the hype around AMD’s console wins, the company does have considerable trouble in getting its silicon into other hardware. AMD’s hardware wins with its APUs have been light in laptops and non-existent in tablets. The only tablet win AMD highlights from its website is an 11.6-inch tablet from Vizio — a company best known for rebranding Taiwan-made ODM TVs and selling them in middle-America box stores with the sales pitch that the consumer is “buying American”. To top that off mobile Kaveri is still missing in action, and AMD’s great mobile saviour, Beema and Mullins, remains hamstrung by an uncompetitive process node.

To top it off Intel’s aggressive contra revenue strategy is keeping AMD out of the low-end space it’s trying to target with Beema and Mullins. Intel, with its massive cash reserves, can afford to spend $100 million specifically targeting growing Shenzhen-based manufacturers while AMD has to borrow money at interest rates higher than Greek debt to stay afloat.

Things might be looking up for AMD with revenue, but there’s a long way to go to having consistent quarter-after-quarter profitability.

For the next quarter, AMD expects revenue to increase 3 percent, plus or minus 3 percent, meaning that it expects revenue to be unchanged.

Source: AMD

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