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AMD Touts Mobile Success, Questions Tablet Opportunity

By - Source: AMD | B 29 comments

AMD announced a solid quarter with revenue increase being driven by servers and mobile processors, but somewhat fell short in desktop processors. Then there was a rather stunning hint that AMD may not be going after the tablet market at all.

On the surface, AMD had a decent Q3 with $1.69 billion in revenue, up 4 percent from last year, as well as $97 million in net income. Nothing to write home about, given Intel's recent blockbuster quarter result, but it's better than the $118 million loss AMD reported for Q3 2010. But there is more to the numbers, of course, and I don't think that I was the only one coming out of the conference call scratching my head and trying to make sense of what AMD is telling us.

Much of the confusion may result of the statements made by AMD's new CEO, Rory Read. There was this persistent note that AMD is making progress, but isn't doing good enough just yet and there is more that has to be done. Read describes that situation as not being "out of the woods yet." By now, we also know that Read is constantly traveling and is quite obviously spending significant time with AMD customers. The new CEO has been in this new position for just 60 days, so we will cut him some slack, but it is obvious that in future earnings calls he will have to answer questions with direct answers and not with scripted phrases. You can read the entire transcript of the call over at Seeking Alpha.

The good news in AMD's Q3 result was success in mobile, where AMD saw its revenues climb by 35 percent sequentially and 20 percent year over year. 90 percent of all shipped mobile processors were Fusion APUs. The company said and it believes that it has a 28 percent global share in the $200 to $600 notebook segment, Read said. Server revenue climbed 27 percent sequentially. So, what about desktops? Read and CFO Thomas Seifert simply ignored this part of the business and it was obvious that something was up with that.

Citigroup analyst Glen Yeung picked the omission up and asked "it sounds like what fell short must have been desktop. And I wonder as I think about the execution issue: One, do you sense that there is a longer term impact from that? Did you just turn some customers off forever because you screwed up on the execution side?"

Read somewhat evaded the question, but eventually noted: "In the desktop space, there's a little less pressure, but we had to choose where we did our manufacturing capacity in order to support our notebook growth and to make sure that we try to deliver on the commitment that we made to our customers. And they felt some of that pain in the third quarter because we weren't able to execute as cleanly as we would like. In the notebook space, we're making progress. In the desktop space, I think we know how to manufacture in that space. We just need to be able to move more of the wafers in that direction."

After a lengthy answer that did not answer the analyst's question and left us speculating, Read apologized and said that he "got fired up on that one." In aggregate, it appears that the ongoing manufacturing and yield issues at Globalfoundries have especially hit AMD's desktop products. AMD is waiting to get access to higher margin 32 nm products, but yields aren't where AMD is expecting them to be. Additionally, the transition to 32 nm forced the company to compromise on 45 nm production capacity as well.

CFO Seifert noted that the AMD clearly has some headwinds in the current quarter as well: "45 nm supply is still going to be not where we want it to be because we continue to trade off capacity towards 32 nm. We also will see some ramp-up costs from a 28-nanometer technology perspective."

While carefully describing the 32 production as a challenge and a scenario in which AMD makes improvements step-by-step, Read at one point said that he was "disappointed" by the production yields in this space. "And that occurred over a sustained period of time," he said, which was a clear shot in the direction of its manufacturing subsidiary Globalfoundries. AMD can be much more aggressive toward Globalfoundries, by the way, as its share in the company has dropped to 9.6 percent. Furthermore, AMD just lost its final member on the Globalfoundries board. As a customer, your language can be different from the language you use as an owner.

The one statement from Read that left me wondering was a response to a question on how AMD will participate in the tablet market. After a long introduction on what customers have told him, Read replied that "I'm not sure the tablet just in the form factor itself is the real game in hand. I think the impact in terms of proprietary control points and chips in the marketplace that's going to occur both in client server over the coming months and years are going to be exciting opportunities."

So, is that a note that AMD will not be building tablet chips after all - a reason believed to be a part of Dirk Meyer's downfall. That was, by the way, the only note about tablets in the entire conference call, indicating that there is no immediate concern at AMD for this segment (even if there was a hint that AMD might be talking about this segment at its 2011 Analyst Day event, which, ironically, has been moved to February 2012). There was not much information that would enable us to see a change in direction at AMD under Read. As far as we can tell, it's still the same as the new CEO indicated that AMD's core opportunities will be in the core trends of "thin and light, convergence, [and] consumerization."

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  • 12 Hide
    krowbar , October 28, 2011 4:06 PM
    Hard to take Wolfgang Gruener's articles serious after all the recent scrutiny. Hopefully AMD will get on track with better a better desktop cpu.
Other Comments
  • 12 Hide
    krowbar , October 28, 2011 4:06 PM
    Hard to take Wolfgang Gruener's articles serious after all the recent scrutiny. Hopefully AMD will get on track with better a better desktop cpu.
  • 2 Hide
    beenthere , October 28, 2011 4:19 PM
    The good news is demand for Llano, BD based Opterons and even FX chips exceeds demand and AMD is still profiable with all the ramping costs associated with Bulldozer based CPUs. With Trinity a few months away and Piledriver based CPUs expected in '12, AMD is headed in the right direction for sure.
  • 1 Hide
    JeanLuc , October 28, 2011 4:19 PM
    In case anyone is wondering the old ATI graphics division chipped in with a $12m profit for this quarter from a revenue of $403m although some of that might be down to the Fusion/APU chips depending on how AMD accounts for those sales.
  • -1 Hide
    silverblue , October 28, 2011 4:21 PM
    I suppose we'll know more in February.

    As regards AMD's shrinking stake in GloFo, couldn't that be responsible for a good deal of AMD's revenue this past quarter? Fusion may be selling, but is AMD actually making money or hiding behind something else?

    JeanLucIn case anyone is wondering the old ATI graphics division chipped in with a $12m profit for this quarter from a revenue of $403m although some of that might be down to the Fusion/APU chips depending on how AMD accounts for those sales.

    APU sales aren't part of those figures, according to Anandtech.
    beenthereThe good news is demand for Llano, BD based Opterons and even FX chips exceeds demand and AMD is still profiable with all the ramping costs associated with Bulldozer based CPUs. With Trinity a few months away and Piledriver based CPUs expected in '12, AMD is headed in the right direction for sure.

    Debatable. All that's saying is that AMD can make anything and people will buy it, regardless of its quality. Fortunately, there's nothing fundamentally wrong with Fusion. I just hope that when Fab 8 is finished, AMD can get more wafers out per month.
  • 6 Hide
    SteelCity1981 , October 28, 2011 4:32 PM
    Amd's Mobile cpu and graphics division are doing fine, it's there desktop cpu division that are keeping them down.
  • 5 Hide
    bustapr , October 28, 2011 4:34 PM
    I really hope trinity is up to par with Phenom II when it comes out. they did pretty well fitting in an Athlon II in the llanos, lets just hope they make some space for L3 cache and ramp up the GPU. I really cant see Fusion failing at the moment.
  • 3 Hide
    beenthere , October 28, 2011 4:40 PM
    Quote:
    Debatable. All that's saying is that AMD can make anything and people will buy it, regardless of its quality. Fortunately, there's nothing fundamentally wrong with Fusion. I just hope that when Fab 8 is finished, AMD can get more wafers out per month.


    You can debate anything but the bottom line is demand far exceeds supply for Llano, BD based Opterons and even FX chips. That is a fact. As far as CPU quality is concerned, the market decides what it wants and obviously it wants these three AMD products or the demand would not be so high. It's reported Cray got the first 10,000 BD based Opterons for their super computers so I expect Opteron 6200s work just fine for server use.

    Few people buy bleeding edge CPUs as they are not cost effective or practical for mainstream PC users. AMD's APU is at least a year ahead of Intel's efforts so that's good for consumers.

    Obviously when Fab 8 is finished AMD will get more wafers per month. How could they not unless they shut the plant down?????
  • 0 Hide
    silverblue , October 28, 2011 4:44 PM
    Fab 8 doesn't belong to AMD... it belongs to GloFo. AMD is one of many customers.

    FX CPUs selling out isn't going to be difficult - AMD can hardly be producing huge numbers of them. Wouldn't mind seeing some sales figures.
  • 0 Hide
    de5_Roy , October 28, 2011 4:45 PM
    cool, amd has finally somewhat succeeded in the notebook market.
    amd said they didn't want to enter ultrabook field at first, after a few days they said they have a platform ready(deccan and brazos-t iirc) for ultrabooks. amd'll flip their statement and go for tablet sooner or later(i've see a few c-50 tablets here and there).
    fx chips (and may be llano desktop chips too) exceed demand because amd doesn't make too many of them because of the production problems. it's easy to twist that fact into 'amd is selling a lot of fx cpus, they're sold out.' type statement.
    amd took a looong time to get bulldozer out, who knows how long they'll take getting piledriver out. they can let tsmc make piledriver if its possible.
  • 1 Hide
    de5_Roy , October 28, 2011 4:59 PM
    Quote:
    Time to consider TSMC for CPU manufacturing as well ?
    :) 

    tsmc made amd's 40 nm brazos apus. :) 
  • 2 Hide
    pelov , October 28, 2011 5:02 PM
    Judging from his response to the desktop segment question, I'm a bit concerned. I think most people are very happy with the llano and want to see future fusion tech do well, but their bulldozer flop and yield issues at GloFo can potentially be serious issues for their desktop chips and future desktop chips. If they're going to stand by the bulldozer architecture, i think it'll be a few years and multiple revisions before we finally see a decent chip, and that would mainly have to do with the software industry embracing multithreaded optimization and not the actual performance of the chips.

    I think focusing on the mobile sector is fine, but the #1 priority, even above performance, is low power consumption. Unfortunately, Intel isn't having any issues at all producing chips that consume less power and still perform respectably. They're about to start producing 22nm chips before the end of the year (Ivy) and don't appear to be having any unforeseen issues.

    I know I may sound like a heretic, but AMD should really reconsider and perhaps go the ARM route. I don't think dropping x86 chip power consumption to ARM levels will ever be possible. Opting to do so can put them ahead of Intel in the mobile market while still pumping out fusion for lappies. Maybe they can then pay a little more attention to us desktop folk as well
  • -1 Hide
    jwcalla , October 28, 2011 5:15 PM
    It seems like the area where AMD is excelling the most is the same space that represents the greatest growth opportunity for ARM in the near future: low-end, low-power, smaller mobile devices and servers.

    The current AMD reminds me a lot of Sun, which simply couldn't grasp certain realities about how technology was changing, and therefore wasn't able to adapt, until finally fading away into irrelevancy. That AMD continues to clutch to x86 even when they're clearly bested by Intel is rather puzzling.
  • 4 Hide
    Parsian , October 28, 2011 6:00 PM
    I dunno what is it about AMD that I so love them much and want to them to succeed. Maybe its because Athlon 64 was super sweet and the taste hasnt gone away.

    I hope AMD can boost their production yield and they should get into more tablets. Their C60 chips are great especially when coupled with Win8
  • -1 Hide
    beenthere , October 28, 2011 6:05 PM
    Hey at least when you buy AMD you aren't supporting a convicted criminal corporation who is still being sued for violations of anti-trust laws that cost all consumers... Intel has also been convicted of U.S. tax fraud several time.

    http://www.theinquirer.net/inquirer/news/2120866/intel-antitrust-claims-dismissed
  • 0 Hide
    ojas , October 28, 2011 6:33 PM
    No wonder their shares are up...so is their market capital...back above $4B for the first time since Bulldozer...
  • 0 Hide
    dreamer77dd , October 28, 2011 7:30 PM
    Well at least they know they have a lot of work ahead of them. They are getting feedback from their customers and keeping them close. I think we will only see the changes happen in a few years from now because things are already in progress before the new CEO was even announced. you can have 32nm or even 22nm but it wont make a difference for AMD if they cant do justice with what they have. AMD FX-850 2 billion transistors loses to Intel 1.16 billion transistors, I think they need to work on the fine tuning of their product. It still a new architecture but hopefully Trinity/pile-driver will show improvements even though it is early.
  • 0 Hide
    bustapr , October 28, 2011 7:57 PM
    ashaneConcise article on the Kindle Fire.AMD should fear the Kindle Fire--it is the true iPad killer. It has more CONTENT than Apple and Android combined! Steve Jobs wanted to nuke Android, but Amazon was nipping in the back tablet door whilst Jobs was fighting Android! Jobs will be turning in his grave...a third tablet rival rises Beware AMD!ashanehttp://www.kindlefiregeek.blogspot.com/

    i wonder if toms will take out the hammer for this one
  • 0 Hide
    danwat1234 , October 28, 2011 8:41 PM
    I am really looking forward to Trinity, which has PileDriver CPU cores with their new integrated GPU. Should womp Intel's mobile Sandy Bridge GPU.
  • 0 Hide
    nezzymighty , October 28, 2011 9:15 PM
    Does this feel like another misguided and confusing article, throwing together facts, to prove ... um... prove what?

    This is funny:

    "...and I don't think that I was the only one coming out of the conference call scratching my head and trying to make sense of what AMD is telling us..."

    So then why did you write and publish the article? I think you were all over the map that you didn't even know where you were headed with the article.

    If I want to complete a stock valuation, I'll do it myself. If I want a trusted business opinion of a company, I'll stick to the Wall Street Journal. If I want to understand specs and stats on the latest technology, I'll stick to Toms.... so stick to the format... evaluate technology only please.
  • 0 Hide
    buzznut , October 28, 2011 11:28 PM
    de5_roytsmc made amd's 40 nm brazos apus.


    Yeah I like this idea too. If GloFo can't handle things for AMD they'd be stupid to rely solely on them.
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