$157 million loss, 15 percent people cut
Last modified on Friday, 19 October 2012 09:38
AMD has announced its financial Q3 2012 results and as it had waned a few days earlier, it marked a 10 percent sequential drop in revenue or 25 percent decrease year-over-year. This translates to a 20 cent loss per share.
The tough part is that AMD went down with gross margin to dangerous 31 percent while Intel had more than double or 63.3 gross margin in the same period. Like much of the industry, AMD has to be over 50 percent to make some profit, as we were told a few years back.
AMD CEO Rory Read claims that "The PC industry is going through a period of very significant change that is impacting both the ecosystem and AMD... It is clear that the trends we knew would re-shape the industry are happening at a much faster pace than we anticipated. As a result, we must accelerate our strategic initiatives to position AMD to take advantage of these shifts and put in place a lower cost business model. Our restructuring efforts are designed to simplify our product development cycles, reduce our breakeven point and enable us to fund differentiated product roadmaps and strategic breakaway opportunities."
In other words there will be a lot of changes and one of the first that AMD under Rory plans to do is to cut 15 percent of its workforce as a plan for the company’s reconstruction. The cuts will mostly be made in Q4 2012 and AMD plans to save some $20 million per quarter in operating costs, while in 2013 it hopes that this saves it $80 million. It’s not clear which divisions will be the most affected.
If we break down AMD’s financial score, the big portion of the Q3 2012 financial loss can be attributed to the heavily delayed Llano. AMD had to write down some $100 million inventory primarily consisting of first generation Llano A-series APUs that were very late to market and didn’t sell that great. AMD had to go with lower average selling prices which attributed to drove of gross margin to 31 percent.
Earlier this year sources close to the company told us that by the time Llano was about to start shipping AMD had Trinity or second generation APU ready, launching it for notebooks in Taiwan on early June 2012 and the delay of the desktop APU to early October launch was to try to sell as many Llano desktop parts before they start shipping clearly superior Trinity.
AMD reports that it computing solution segment revenue decreases 11 percent sequentially and 28 percent year over year. This was driven by weaker consumer buying environment impacting sales to EOM as well as lower ASPs across all markets.
Operating loss was $114 million compared to a $82 million loss in Q2 2012 and $149 million in Q3 2011. If you compare these numbers, year over year AMD did better this quarter.
AMD Radeon lovers will want to know that graphics segment revenue decreased seven percent sequentially and 15 percent year over year. We believe that Intel and Nvidia benefited from this. GPU revenue decreased 15 percent sequentially due to lower unit shipment to OEMs partial offsets by higher channel sales. [This is actually good, as channel sales makes more money. Ed]
Operating income from the graphics business unit was $18 million compared to $31 million in Q2 2012 and 12 million in Q3 11. It’s good to know that GPU average selling prices was up year over year.
The second generation A series that launched in early October codenamed Trinity can help AMD in both OEM and channel and it has high hopes for Hondo AMD Z 60 APU tablet processor that should end up in a few tablets this year. Its good to know that AMD has a horse in the Windows 8 tablet race.
AMD launched AppZone that will let the consumer download and run thousands of Android apps on AMD based tablets, notebooks and all in one PCs. AMD also has high hopes for its SeaMicro serve business that continues to launch new products including the severs with AMD’s own Opteron processors.
The company stays committed to Fire Pro processional graphics solutions launching AMD FirePro W5000, W7000, W8000 and W9000 GPUs, it still has high hopes for HSA alliance of the willing. It also announce collaboration with CiiNow to deliver the first cloud gaming solution powered by AMD Radeon graphics to enable the best online gaming experience possible. It didn’t mention that it plans to launch Vishera, second generation FX cores later this month, and this will help its cause too.
AMD is also putting in place a business model to break even at an operating income level of $1.3 billion of quarterly revenue. The company is targeting to achieve this by the end of the third quarter of 2013. For the fourth quarter of 2012, AMD expects revenue to decrease 9 percent, plus or minus 4 percent, sequentially.
We are sorry for the friends that we get to know over the many years but this cut will eventually help AMD. The horror year of 2012, probably one of the worst in AMD’s history is getting closer to the end with 2013 probably being much better for them.