Advanced Micro Devices, Inc.
conference date: October 14, 2010 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2010 (3rd quarter)
Prelude: On September 23, 2010 AMD announced that it expects third quarter revenue to be 1% to 4% lower than in Q2. Prior guidance had been Q3 would be seasonally up.
Overview: Could be worse. GAAP losses, non-GAAP profits
Basic data (GAAP):
Revenue was $1.62 billion, down 2% sequentially from $1.65 billion, but up 16% from $1.40 billion in the year-earlier quarter.
Net income was negative $118 million, down sequentially from negative $43 million, but up from negative $128 million year-earlier.
EPS (earnings per share) were negative $0.17, down sequentially from negative $0.06, but up from negative $0.18 year-earlier.
Flat revenue about flat sequentially. $610 million operating expenses. Interest expense near $48 million. Zero tax.
Showed ability to execute in difficult market, showing positive cash flow and non-GAAP profits. Margins were better than anticipated, and growth was in higher-margin sectors. Increasing confidence in AMD's ability to thrive, especially with Fusion APU launch later this quarter.
Ownership of Global Foundries dropped to 26% of total. GAAP Losses (non-cash) due to Global Foundries were $186 million.
GAAP operating income was $128 million.
Non-GAAP $108 million net income. EPS $0.15. 46% gross margin, up 1% sequentially.
Notebook segment showed gains.
Server business added IBM to those that carry 6000 Opteron series.
Graphics (GPU) are now used by Apple for . Next generation GPUs launch next week.
Advanced Processing Unit interest is high, with Brazos shipping in Q4 and shipments to consumers in Q1 2011. Brazos is the platform for Ontario and Zacate APUs. Llano to ship in first half of 2011. Bulldozer server and desktop processors on track to ship in 2011.
$245 million non-GAAP EBITDA. $91 million adjusted free cash flow. Cash balance $1.73 billion, down due to repurchase of convertible debt. Long term debt ended at $2.2 billion.
Computing solutions $1.23 billion in revenue, flat sequentially but up 13% y/y. Record mobile processor units and increased ASPs . Single digit desktop processor revenue gains. Opteron server gains were in newer 4000 and 6000 lines, but revenues and ASPs (prices) nearly flat.
$390 million GPU revenue, down 11% sequentially, but up 33% y/y, as ASPs and units shipped decreased sequentially due to selling more value segment products.
Apple iMac and Mac Pro desktops use AMD Radion graphics for all configutations now.
Financial analyst day is November 9, 2010. Will give lots of detail on Brazos then.
Notebook computer stength? We saw weakness in America and Europe for notebooks, compared to our plan. China and emerging markets showed good growth. We saw a relatively richer mix of triple and quad core notebooks, but the main motive for consumers is for video processing.
Magny Cours? That launched in March, but 6000 platforms showed up in Q2, 4000 platforms in Q3. We saw a pretty good ramp for 6000 within our product line, to about on-half of units shipped. With full arsenal in Q4 could provide market share growth. We believe we should do better due to the value proposition of our products.
Graphics versus Intel? The industry conversation is increasingly around graphics, and we have the best graphics. Intel Sandy Bridge is supposed to have improvements over earlier Intel graphics, but well behind AMD graphics. OEMs still need a discrete graphics option for Intel processor based systems.
Graphics trend in Q4? Discrete notebook graphics were down in Q3 because of over-ordering in Q2. Some customers went to NVIDIA just in case we could not produce enough chips. Some OEMs de-featured discrete graphics options in Europe.
PC OEMs leaving Q2s were expecting explosive growth rates. In Q3 that reversed across the supply chain. That has not completed, so we say flat sequential revenue growth.
Netbook opportunity for AMD, tablets? Brazos platform has two CPU types. A lot of our design wins is at low end of mainstream notebook market. Other design wins are in netbooks, which we had not been participating in. Tablets have been disrupting notebooks, it is hard to say to what degree, but AMD believes tablets will be acretive to our market opportunities. Our notebook share is only 13 or 14%, we would hope to improve that and do at least as good in netbooks.
Will hybrids hurt attach rates for discrete graphics? So far OEMs want to have a step up to discrete graphics.
Tablets eating into emerging markets? We believe overall there will be healthy notebook growth next year.
Compared to Intel, guidance? 3% higher guidance for Intel q4 would seem to just be noise.
GPU refresh? 2nd gen DX11 products launching next week. All family members shipping by end of Q4, total volume in hundreds of thousands of units. Do not believe Q3 weakness was due to people waiting for the new technology.
APUs should have better performance for less money, so should gain us market share over time, especially as GPU subunits pick up more use for application processing.
When will you have a product for the tablet market? Maximum power dissappation should be 2 to 3 watts, about twice of the components for netbooks. Tablets are still not a priority for us, but we will introduce a product when the market is larger.
We expect to see some headwinds from Euro in Q4, also Q4 is more consumer oriented.
Key to getting Llano to market? Volume samples to customers in Q1, followed by a steep production ramp in first half.
Utilization rate charges for GlobalFoundries? For Q4 we don't expect much change.
Did server revenue increase sequentially? No. Flat sequentially. Chip set revenues down.
Pricing environment right now? Nothing exceptional right now.
Inventory? We expect PC demand to pick up, our shipments flat, so believes that will end inventory excess in system. AMD plans to keep its inventories about flat in Q4, after a small build in Q3.
AMD's strategy is to have good margins, not to reduce them to gain share. But AMD is the small player in the market.
32 nm problems? We can't say we are pleased. In the last 90 days GlobalFoundries has made progress and is building momentum.
NVIDIA's more competitive products came out and had some effect in Q3, but we are about to do a DX11 refresh, so feel confident.
Lack of gains in server market is mainly due to the longer time cycles in the enterprise market combined with the relatively new releases.
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