AMD Back In Black Thanks To Gaming Consoles

AMD has finally achieved the long climb back to profitability, the chipmaker has revealed in its latest financial results.

This comes after CEO Rory Read correctly predicted three months ago that the chip maker would return to black numbers in the third quarter after three years in the red. This was due to AMD’s pursuit of new growth areas, and that’s exactly what happened.

Financial Results

The world’s second-largest chipmaker turned in quarterly financials that barely edged Wall Street’s expectations for Q3 2013, reporting revenues of $1.46 billion (£904m), or 4 cents (£0.02) per share, while lowering its operating expenses to $450 million (£279m).

This resulted in a $48 million (£30m) profit, or 6 cents (£0.04) per share, for the quarter that ended 30 September. It was a marked improvement over the loss of $157 million/£97m (21 cents/£0.13 per share) in the year-ago quarter and a $74 million (£46m) loss in Q2 2013. Revenue improved to $1.46 billion (£904m) from $1.27 billion (£786m) a year ago and $1.16 billion (£718m) last quarter.

The good news not withstanding, the company’s stock slipped about 7 percent in after-hours trading on the New York exchange to $3.81 (£2.35) after closing at $4.09 (£2.53).

Sunnyvale, California-based AMD can thank its embedded and semi-custom chip divisions for spearheading the financial good news, because they brought in almost one-third of the company’s revenue in the quarter. It also helped greatly that AMD started shipping large numbers of chips for video game consoles that will be hitting store shelves this holiday season; most of them will go into the Sony PlayStation 4 and the Microsoft Xbox One.

Transformation Plan

“AMD has returned to profitability because we are successfully executing a three-stage transformation plan that we outlined a year ago,” Read said on a conference call to analysts and journalists. “We achieved 26 percent sequential revenue growth driven by our semi-custom business and remain committed to generating 50 percent of our revenue from high-growth markets over the next two years.

“Developing industry-leading technology remains at our core, and we are in the middle of a multi-year journey to redefine AMD as a leader across a more diverse set of growth markets.”

These new growth markets – which range from dense servers and ultra low-power clients to professional graphics and embedded systems – will account for 40 to 50 percent of the company’s revenue in the next two to three years, Read said back on 18 July. That will lessen AMD’s reliance on the traditional PC market, which continues to see sales fall worldwide as customers spend more of their money on tablets and smartphones.

Sales of processors for desktop, laptop and notebook PCs have dropped about 15 percent from 2012. All chipmakers – including No. 1 Intel – have felt the pinch.

In its guidance, AMD said that it expects fourth-quarter revenue to increase about 5 percent, plus or minus 3 percent, over its third-quarter revenue, which comes out to a forecast of between $1.49 billion (£922m) and $1.58 billion (£978m).

eWEEK Senior Editor Jeff Burt contributed to this story.

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Originally published on eWeek.