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PS4 and Xbox help AMD to a profit, but outlook disappoints

AMD's business has been improving thanks to the use of its technology in the Xbox One and PS4

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Advanced Micro Devices has reported a profit for the fourth quarter, thanks largely to the sale of its chips in the latest game consoles from Microsoft and Sony.

AMD's forecast for the current quarter seemed to disappoint, however, and investors pushed its shares 10 percent lower after the results came out.

The chip maker's profit for the quarter ended Dec. 28 was US$89 million, compared to a loss of $473 million a year earlier, AMD announced Tuesday. It was its second profitable quarter in a row after a string of losses.

Revenue climbed 38 percent to $1.59 billion, AMD said. Both the revenue figure and its earnings on a pro forma basis beat the expectations of financial analysts polled by Thomson Reuters.

The gains came mainly from AMD's Graphics and Visual Solutions segment, which sells semi-custom chips that are used in products including Sony's PlayStation 4 and Microsoft's Xbox One. Combined, the two consoles have sold more than 7 million units in less than two months, AMD said.

That helped lift its graphics revenue by 165 percent, or more than double, to $865 million. Average selling prices for AMD's GPUs also increased from a year earlier, the company said, thanks to its new R7 and R9 Radeon graphics cards.

The business unit that sells CPUs for PCs and servers performed less well. Sales were down 13 percent year over year, continuing a pattern from the past six quarters.

President and CEO Rory Read said AMD was hit by slower sales of consumer notebooks, a market where it traditionally does well but that's being eaten up by tablets. Last year's was "arguably the most difficult PC market in history," he said on a conference call.

Some parts of the PC market may be stabilizing, Read said, echoing remarks by Intel last week, but AMD still expects the PC market to be down 10 percent in 2014.

That may have contributed to its cautious outlook. The company expects its first-quarter revenue to be down by between 13 percent and 19 percent compared to the fourth quarter, AMD said.

That apparently jolted investors. AMD's shares were down about 11 percent in after-hours trading, at $3.70.

For the full year, AMD reported a loss of $83 million on revenue of $5.3 billion, which was a 2 percent drop from 2012. The company thinks it can report a profit for the current year and also grow revenue, Read said on the earnings call.

AMD is trying to reduce its dependence on PCs even further and expand in areas such as professional graphics, high-density servers and embedded systems, as well as by selling more semi-custom silicon.

It will begin sampling its first ARM-based processor for servers this quarter, with the full launch scheduled for this year, Read said. The company also secured "a number of premium notebook design wins" for its just-launched Kaveri chip, according to Read.

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com



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