Analyst Conference Summary

Advanced Micro Devices, Inc.

conference date: January 22, 2013 @ 2:00 PM Pacific Time
for quarter ending: December 29, 2012 (fourth quarter, Q4)

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Forward-looking statements

Overview: Another quarter of decline. Lots of non-cash items in the GAAP numbers. Revenue did meet guidance.

Basic data (GAAP):

Revenue was $1.16 billion, down 9% sequentially from $1.27 billion, and down 32% from $1.69 billion in the year-earlier quarter.

Net income was negative $473 million, down sequentially from negative $157 million and down from negative $177 million year-earlier.

EPS (earnings per share) were negative $0.63, sequentially from negative $0.21, and down from negative $0.24 year-earlier.


Q1 2013 revenue expected to decline 6% to 12% sequentially, with flat gross margins. $495 million operating expenses. Inventory will ramp for new products.

2013 operating expense $450 million per quarter by Q3. $150 million capital expense for full year. Believe cash will remain in $1.1 billion range during the year.

Conference Highlights:

Macro environment resulted in a weaker-than-expected PC market.

Non-GAAP numbers stated as: operating loss $55 million. Net income negative $102 million, improved sequentially from negative $150 million, but down from positive $138 million year-earlier. EPS negative $0.14. Gross margin 39%, up 8% sequentially due to higher priced desktop microprocessors.

Attempting to realign product portfolio with the rapidly changing PC environment. Continues to invest in new technology, particularly in low power devices, customization of SoCs and dense servers. "We expect to deliver differentiated and groundbreaking APUs to our customers in 2013." 2013 products have passed key milestones. Sees profitability and positive free cash flow by second half of year.

Net restructuring charge in the quarter was $90 million. The GlobalFoundries charge was $273 million, which was included in GAAP but not non-GAAP numbers.

Computing solutions segment revenue of $829 million was down 11% sequentially and 37% y/y, due to lower unit volumes. ASP was up sequentially but down y/y. Notebook sales were good, reaching 1 in 3 of units sold in North America. Channel inventory was reduced. SeaMicro dense server revenue grew. Server revenue overall was up sequentially.

Graphics segment revenue was $326 million, down 5% sequentially and 15% y/y on lower unit volumes. ASP flat sequentially but up y/y. AMD Radeon HD 8000M series mobile GPUs introduced and FirePro S10000. Workstation and gaming revenue hit a record. ASUS, Lenovo and Samsung will be offering notebooks with new low-power AMD GPUs.

Cash and equivalents ended at $1.2 billion. $454 million was listed as payable to GlobalFoundries. Long term debt $2.04 billion. $562 million inventory, down 25% in the quarter.

AMD has demonstrated working Temash and Kabini silicon. These APUs will be quad core SoCs for the tablet and mobile markets. Also introducted new Richland A series APU, new Opterons, and Piledriver FX CPUs.

New Wii U console has AMD graphics.

See reducing to $450 million per quarter operating expenses by Q3.

Cost of sales was $977 million, leaving gross margin of 178 million or 15%. R&D expense was $313 million; marketing, general and administrative $193 million; amortization $4 million; restructuring $90 million. Operating income was negative $422 million. Interest expense net $43 million. Other expense $4 million.


Embedded revenue outlook? We already have a substantial embedded business. We will be shipping new products, but announcements will be one by one. Revenue will ramp throughout the year.

New opportunities? AMD has a deep base of IP and a great pool of engineers. Strategy is consistant, but we are accelerating the pace. We showed that in Q4. Launch of powerful new products, many customized, will be transformative. Dense server will also be a source of future growth. We are aiming to target the high growth segments of the market. In a few years we may have 40% to 50% of revenue in specialty embedded products.

One time charges in 2013? In Q4 we accelerated the GF charge all into the quarter, rather than spreading it into Q1. We do not anticipate any major special charges in 2013.

Gaming versus other embedded revenue? Embedded business has long life cycles. We expect high-volume design wins as we move into 2014.

Tablet category? We are excited about Temash tablet. We have an opportunity to lead in full Windows 8 tablets. It is about SoC design and getting products to market at the right time, to catch the strong back-to-school cycle.

Intel adding capacity? We are clear and focused on our strategy. Customer acceptance is key and interest is high. That will get us to profitability and growth. "We have to focus on what we are good at and getting the products executed." [WPM: in other words, we are competing less and less directly with Intel]

We are not providing revenue guidance for the year because the PC market is too hard to predict.

We will pay $175 million to GlobalFoundries in Q1 2013.

Sale lease-back of headquarters may complete this quarter.

R&D expense? We believe our cuts will not hurt future products. We are reducing the number of process technologies, layers, etc. We are also getting better at reusing IP. We are changing the types of design wins we go after, because every design wins drive costs. Our 2013 roadmap progress is on schedule.

We have lost some graphics share over the last two quarters, but we believe we are at the bottom of the share curve. We have a strong graphics portfolio as we go forward.

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Copyright 2013 William P. Meyers