AMD Misses Q3 Expectations, Plans Restructuring
A week ago, AMD (AMD) replaced Rory Read, its former fix-it chief executive who’d arrested the company’s losses and found new revenue sources, with Dr. Lisa Su, its highly regarded chief operating officer (COO) who took the company’s reins after handling its business groups, sales and global operations.
A week ago, AMD (AMD) replaced Rory Read, its former fix-it chief executive who’d arrested the company’s losses and found new revenue sources, with Dr. Lisa Su, its highly regarded chief operating officer (COO) who took the company’s reins after handling its business groups, sales and global operations.
Let’s hope AMD’s welcoming card to Su isn’t its Q3 performance, as the company posted worse-than-expected results with revenue of $1.43 billion, a 2 percent year-over-year decline, and net income of $17 million, or 2 cents a share, a 67 percent topple from the same time last year. On a non-GAAP basis, AMD reported net income of $20 million, or 3 cents a share for the quarter. AMD’s cash storehouse also took a hit, slipping to $938 million at the end of the quarter.
Wall Street analysts expected the chip maker to turn in sales of $1.47 billion and 4 cents in non-GAAP per share earnings.
Su blamed “challenging market conditions” for the company’s poor performance.
“AMD’s third quarter financial performance reflects progress in diversifying our business,” she said. “Our Enterprise, Embedded and Semi-Custom segment results were strong; however, performance in our Computing and Graphics segment was mixed based on challenging market conditions that require us to take further steps to evolve and strengthen the financial performance of this business. Our top priority is to deliver leadership technologies and products as we continue to transform AMD.”
Su reacted quickly to the down quarter, immediately announcing a 7 percent layoff to be completed by the end of the year and a structural overhaul that includes dumping some of its real estate to better position the company for profit and growth and to reprioritize its opportunities. Most of the restructuring will be done this year, Su said.
AMD will take a $57 million charge for the restructuring in Q4 2014, mostly for severance pay, and charge off an additional $13 million in the first half of 2015 for real estate. The layoffs and other reorganizing will save AMD $9 million in operating expenses in Q4 2014 and $85 million in 2015, the company said.
“While decisions that impact the size of our global team are never entered into lightly, this is the right step to ensure we prioritize our resources and engineering investments in our highest-priority opportunities that can drive improved profitability and long-term growth,” Su said.
In July, on Read’s watch, AMD reorganized into a two groups—Computing and Graphics, focused on desktop and notebook processors and chipsets, discrete GPUs and professional graphics; and, Enterprise, Embedded and Semi-Custom, which includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties.
AMD isn’t expecting smoother sailing in Q4 either, as it forecast a 13 percent decline in revenue, plus or minus 3 percent.
