AMD: Looking Past the Weak Earnings Performance

Last week, Advanced Micro Devices (AMD) announced its third-quarter results that revealed a sequential improvement in its financial performance, though its year-over-year performance was still weak.

The company announced third-quarter net revenue of $1.06 billion, a sequential increase of 12.6% from $942 million in the second quarter of 2015. But, this was down 25.7% year-over-year. The company has also provided its revenue outlook for the fourth quarter of 2015 and estimates revenue to decline sequentially in the range of 7% to 13%, indicating more pain going forward.

The year-over-year decline in top line is attributable to lower sales in the graphics and computing segment.
Further, a planned inventory write-down has adversely impacted the company’s bottom line. So, can Advanced Micro Devices make a comeback? Let’s find out.

Working on diversification

AMD is focused on diversifying its revenue streams by increasingly exploring the latest datacenter segment, driving significant customer traction. Further, AMD is also focused on optimizing its cost structure by minimizing the non-core expenditures and gradually paying off its long-term debt with no short-term debt maturities till date.

AMD recently signed a $436 million joint venture agreement with Nantong Fujitsu Microelectronics Co., Ltd that integrates the latter’s OSAT expertise with high-volume ATMP facilities of AMD to uniquely service a wide range of customers. This strategic contract further enhances AMD’s focus on designing superior-performance products and provides it with nearly $371 million in cash from Nantong Fujitsu Microelectronics which holds 85% ownership of the key joint venture.

AMD has also entered into a strategic collaboration with Oculus and Dell to endow Oculus Ready PCs with AMD Radeon GPUs, delivering outstanding gaming performance and allow stunning VR experiences for consumers across the globe by using AMD VR control with advanced LiquidVR and Graphics Core Next architecture.

Lowering costs

AMD has also successfully lowered its operating expenditure from 43% of revenue during the first quarter of 013 to 37% in the second quarter of 2015 through strategic operational execution focused on minimizing non-core expenses while delivering outstanding stockholder returns. AMD is evaluating further key actions to lower its present cost structure and forecasts the restructuring charges linked to those actions during the second half of 2015.


Hence, AMD is making good moves for the long run by developing strategic partnerships, develop new products, and drive significant customer traction. As such, if we look beyond the weakness in the short run, Advanced Micro Devices can make a comeback in the long run.
Published on Oct 22, 2015
By Harsh Singh Chauhan

Copyrighted 2016. Content published with author's permission.

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