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It’s the middle of April and that means it’s once again earnings season for the prior quarter.

Late yesterday AMD released their earnings report for Q1 2012, and it turned out to be a bit of a doozy. For the quarter AMD brought in $1.59 billion in revenue, with a net loss of $590 million. This is compared to $1.61B in revenue and a $510M net profit in Q1 of 2011, meaning AMD’s revenue is slightly down on a year-over-year basis, while their net income went well into the red.

AMD Q1 2012 Financial Results
  Q1'2012 Q4'2011 Q1'2011
Revenue $1.59B $1.69B $1.61B
Net Income -$590M -$177M $510M

Overall, while things have been going modestly well for AMD lately thanks to the strength of their product lineup, their stake in Global Foundries has continued to drag down the company’s profits. In Q4’11 AMD had to take $209M charge that drove them into the red then, and Q1’12 has not fared any better.

As you may recall, last month AMD fully divested themselves of Global Foundries, eliminating their 8.8% share of the company. This divestment was part of a larger revision of AMD’s wafer agreement with GloFo, which saw AMD giving up their share in the foundry as part of a larger payment to GloFo in order to get out of a previous exclusivity agreement with GloFo that had entitled them to production rights on some 28nm APUs. Altogether AMD has taken a $703M charge, composed of cash and and their GloFo stake, in order to get out of using GloFo's 28nm process; and that's every bit as bad as it sounds.

The good news of course is that AMD’s GloFo-related financial troubles are almost at and end now that they no longer hold a stake in GloFo, with the bad news being that there are still a few more payments to go until they’re fully freed. On top of the $703M charge for Q1, AMD owes a further $275M to GloFo over the next year, with AMD choosing to write all of this off in their $703M charge for Q1. However once they’re paid off next year, that’s it – AMD will have no further financial ties to GloFo, with the only remaining ties being the contract fab work GloFo does for AMD.

In any case, not counting their problems with GloFo, AMD’s non-GAAP net income for Q1’12 would have been $92M, which is a small but notable increase over their non-GAAP net income of $56M in Q1’11. Even though revenues were down, AMD’s operating income from both GPUs and CPUs is up versus 2011, reflecting the higher gross margin attached to AMD’s latest generation of products.

AMD Q1 2012 Computing Solutions Division Financial Results
  Q1'2012 Q4'2011 Q1'2011
Revenue $1.203B $1.309 $1.2B
Operating Income $124M $165M $100M

In particular, on the CPU side of things the average sale price for AMD CPUs has held steady, but overall costs have come down slightly, making it a net win for AMD. CPU revenue for Q1’12 was $1.203B with an operating income of $124M, versus $1.2B and $100M for Q1’11. All things considered Bulldozer doesn’t seem to have lit a fire under AMD, and the lack of new APUs to replace Brazos isn’t helping, but at the very least AMD is holding their ground.

AMD Q1 2012 Graphics Division Financial Results
  Q1'2012 Q4'2011 Q1'2011
Revenue $382M $382M $413M
Operating Income $34M $27M $19M

Meanwhile on the GPU side of things this was the first quarter where AMD’s new Southern Islands GPUs were shipping, which is both good news and bad news for AMD. Traditionally quarters where major new GPU architectures are introduced see lower revenue as customers hold off on purchases, and with the launch of Southern Islands early in the year this was no exception. However new GPUs also launch at higher prices, which pushes margins up. The net result is that while revenue takes a step back profits increase, which is exactly what AMD needs at the moment.

Altogether AMD booked $382M of GPU revenue in Q1’12 with an operating income of $34M, versus 413M in revenue with an operating income of only $19M in Q1’11. The increase in operating income over Q1’11 is thanks in large part to AMD’s nearly quarter-long 28nm product lead, combined with AMD’s conservative pricing. Q2’12 should see revenue improvements as AMD will have been shipping desktop SI GPUs for the entire quarter along with introducing mobile SI GPUs, however as we saw earlier this week AMD’s conservative pricing has already eroded due to a need for price cuts, meaning that AMD’s margins will likely be going down.

Moving forward, Q2’12 is widely expected to see the launch of AMD’s Trinity APU, which should give their CPU business a shot in the arm. At the same time we’re expecting AMD to finally launch Southern Islands products for the mobile market, which will be important for AMD as their mobile GPUs are high volume products.

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  • medi01 - Monday, April 30, 2012 - link

    Uhm, somehow it didn't work other way round, did it? Oh, and on top of being SLOWER and more power hungry, Intel's netburst CPUs were also more expensive. Reply
  • Beenthere - Friday, April 20, 2012 - link

    Without the GF contract buy out AMD would have netted ~$200 million so not a bad quarter at all. Reply
  • Southernsharky - Friday, April 20, 2012 - link

    Whether you want to call these loses Gap or Non-Gap or related to or caused by GloFlo or not is meaningless. The bottom line is that the company had to pay out a lot of money and lost a lot of money.

    The fact is that these expenses represent loses to the company due to bad business decisions which were made in the past and are reflected in the current.

    And frankly, given the poor state of AMD's current product offerings, one has to wonder if these financial burdens won't be the straw that killed the camel. Every dime spent on this and on legal costs represents a dime the company can not spend on R&D.

    Anyone remember AMD laying off 10 percent of its workforce awhile back? Think it had nothing to do with this? ? ? You probably also believe in Santa.
    Reply
  • Taft12 - Monday, April 23, 2012 - link

    Uhh, AMD has successful product offerings in every CPU and GPU segment except for high-end desktop CPUs, which is quite tiny (although quite profitable). Have you looked in a Best Buy flyer at the desktops and laptops lately?

    AMD really is similar to Nvidia now - now fabless and diversifying into different markets as traditional CPU and GPU businesses gradually change.
    Reply
  • CeriseCogburn - Monday, April 30, 2012 - link

    And amd just lost almost a billion dollars. Reply
  • Wolfpup - Friday, April 20, 2012 - link

    We need the competition, and I think their products are better than ever. Honestly 7, 10 years ago I didn't use AMD because the third party chipsets were unacceptable IMO. Now? They seem to be as rock solid as Intel, so I've been recommending their stuff left and right.

    On the low end they're close to being the only company that can give you a balanced system, and as far as I'm concerned they're still perfectly reasonable at the mid range too.

    I doubt Intel's chips would be half as powerful or fast if not for AMD constantly improving too. I've got my first AMD system (that actually works right at least...3rd party chipsets always gave me problems and ended up being replaced for Intel), and I'm seriously considering a Trinity notebook in a few months.
    Reply
  • tonny b - Sunday, April 22, 2012 - link

    There are few Discrepancies in the article.

    1.) The Article fails to write about the growth in sales for AMD in a seasonally down quarter. AMD actually sold more processors that last quarter of last year as first quarter is a seasonally weak quarter. INTEL;s sales were down 7-10% as well. So AMD on contrary did very well.

    2.) The article says " In any case, not counting their problems with GloFo, AMD’s non-GAAP net income for Q1’12 would have been $92M, which is a small but notable increase over their non-GAAP net income of $56M in Q1’11" Is an increase from $56 to $92 a "SMALL increase". Dude its more like its nearly doubled.

    3.) $703 charge is not all cash related impact and its also not solely related to GloFlo. Its a total charge for GloFlo and Sea Micro acquisition.

    4.) The article says "All things considered Bulldozer doesn’t seem to have lit a fire under AMD, and the lack of new APUs to replace Brazos isn’t helping, but at the very least AMD is holding their ground." Now its seems its true that Bulldozer is not making much money for AMD but they did mention that sales of Bulldozer doubled from last quarter. So it could be assumed that its faring a bit better and the market adoption is continuing, albeit slowly and at not much profit to AMD. Also Brazos is doing extremely well for AMD. Have you seen any of the Best buys, Amazons, Tiger direct etc websites. E and C processors are really selling well and doing well for AMD, so why would they be in a hurry to replace those. Also Brazos 2 is already shipping now.

    I don't mean to be rude or anything but feel that as a JOURNALIST, complete information were not provided which should be the aim of any article. A reader would likely think that AMD is losing money as it was 4 years ago but the truth is that they are actually doing better and making some money. Do you know that AMD has reduced its debt from over $6B after ATI acquisition to close to $2B.

    None the less thanks for the article.
    Reply

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