Threading the needle: AMD navigates tricky 2013, should return to profitability thanks to Xbox One and PS4

Autore: ExtremeTech

AMD headquarters in Sunnyvale, California

AMD’s second quarter financial results were released yesterday and they’re reasonably good, relative to the company’s current position and the strength of the PC market. AMD lost $ 74 million in Q2, as compared to the $ 147 million loss it posted in Q1. Computing Solutions revenue — that’s the CPU/APU side of the business — was up $ 90 million, which is excellent news given the tough quarter the company has faced. AMD attributed the gains to strong initial shipments of Kabini and Temash, as well as some additional server volume. The gains were attenuated slightly by lower average selling prices, but that’s still a net improvement.

The company’s graphics business has been renamed the Graphics and Visual Solutions group, but sales were down slightly compared to Q1, with $ 320 million in revenue as compared to $ 337 million. That shift wiped out AMD’s net income from graphics; the segment reported as breaking even this past quarter. While these results aren’t as strong as investors would like — the company is still losing money — the good news is that AMD has passed through what was an extremely difficult first half of the year for the entire business. Six months ago, there were questions as to whether the company would be able to maintain enough cash to avoid liquidity issues, but this didn’t prove to be a problem.

Console launches anchor back half of the year

By far the most interesting part of the financial call was the talk surrounding AMD’s upcoming console business. For the past decade or more, AMD and Intel have largely moved in lockstep — if Intel expects revenue to be higher for an upcoming quarter, AMD generally predicts higher revenue as well. This quarter, that’s notably different. Intel has cut its Q3 prediction sharply, down to $ 13.2 billion from an initial $ 13.8 — while AMD predicts that its own revenue will be 22% higher than the second quarter.

That’s a significant departure from Intel’s predictions, but it’s tempered by some other statements AMD has made regarding margins. When asked about the console margins, AMD executive Devinder Kumar said: “I think we are giving guidance for Q3 and guiding to the low single-digit from a Q3 standpoint… looking out in the future it’s hard to tell, but at least at the starting point for the next couple of quarters I would target at the low double-digit.”

There have been several ridiculously enthusiastic articles on AMD’s console business, with some people predicting that the company would pocket between $ 60 to $ 100 in profit for every Xbone or PS4 sold. This should throw cold water on such irrational exuberance — console margins, as we’ve previously discussed, simply aren’t that good. AMD’s own predictions for the impact on the company’s bottom line are very modest and should be treated as such. (Read: Nvidia gave AMD the PS4 because console margins are terrible.)

AMD's Never Settle

The Never Settle program has boosted Radeon sales and helped drive high-end product adoption

Does that mean these wins aren’t important? Absolutely not. Building GCN technology into modern consoles has potential long-term upside for AMD — it gives game developers a common design target across the various platforms. An extra $ 80 million per quarter could make the difference between small profits and modest losses, and that’s revenue AMD could use. According to Read, one of the benefits of the semi-custom business is that the difference between gross margin and operating margin is fairly small — there’s not a lot of costs to account for once the R&D is finished and the products are shipping.

The PS4 and Xbox One aren’t going to change AMD’s future, but they should provide some much-needed stability. If Kabini and Temash continue selling well, AMD will be in a much better position to navigate a PC market that’s become extremely unstable as customers move to different products and operating systems.

Now read: Xbox One vs. PS4: How the next-generation console specs compare

5 thoughts on “Threading the needle: AMD navigates tricky 2013, should return to profitability thanks to Xbox One and PS4

  1. Io sto pensando di vendere la mia ps3 e comprare la ps4 ma secondo voi conviene comprarla subito o aspettare ?

  2. Ho comprato da poco la Playstation 3 e sarebbe un peccato se questi giochi e altri che ho sentito x ps4 nn saranno x ps3… Davvero un peccato!

  3. Ciao a tutti come ho gia detto un l’xbox 360 e vorrei giocare a giochi della ps3.. tra poco però uscirà la ps4 e ho letto che sarà retrocompatibile grazie al servizio gaikai.. però c’è anche scritto sul sito della sony che con gaikai non ci saranno tutti i titoli delle vecchie console e quindi ho paura che quelli a cui vorrò giocare non ci saranno! e ho anche letto che non sarà possibile utilizzare subito al lancio della ps4 il servizio gaikai e bisognerà attendere un bel po.. voi cosa mi consigkliate di fare????? grazie a tutti

  4. Conoscet qualche sito o negozio dove si possono acquistare giochi a basso prezzo?
    Su amazon hanno detto che i prezzi per ps4 sono provvisori ovvero 70€. Sono provvisori oppure no? Se sono provvisori dopo quano si abbasseranno?

  5. Considerato che il prezzo sembra anche “abbastanza” abbordabile (sul web dicono 400€) secondo voi c’è il rischio che in breve tempo ci sia il salto di console? Mi preoccupa soprattutto per l’online della ps3, non vorrei che nel giro di un anno si svuotasse subito di giocatori. Tra l’altro non ho ancora capito se la ps4 leggerà i giochi della 3, se non li legge allora sarà un punto a suo sfavore. Voi cosa farete, resterete su ps3 o passerete su ps4?

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