AMD back in the black, but no thanks to the PC

18 Oct 2013
AMD

AMD returns to profitability with console push, but its PC business is shrinking

AMD's made good on predictions that it would return to profit, thanks to demand from console manufacturers, but that might not be enough to make up for its shrinking PC business.

In a mixed financial report, the chip maker said it has benefited from supplying semi-custom processors for the Xbox One and the PlayStation 4, swinging back to a third-quarter profit and beating analyst expectations.

But PC chip sales, AMD's core business, shrank 15% year on year in what CEO Rory Read admitted was the end of the "go-go era" of growth. "There is no doubt that the PC client segment, particularly at the entry level, will feel pressure from tablets," he said. "It’s a competitive space - we are going to be in there and we are going to compete because we have a very good product."

No shortcut back

Despite Read's bullishness, analysts compared AMD's performance unfavourably with Intel, which posted bigger profits earlier this week and saw PC chip sales grow 3.5% year on year.

"We see no shortcut to AMD to regain market share [in PCs]," wrote Auriga analyst Daniel Berenbaum. "Given past missteps, we have low confidence in AMD's design and manufacturing execution."

Meanwhile Intel is successfully pushing into mobile with its next-generation chips for PCs and tablets, codenamed Haswell and Bay Trail.

"They probably lost market share to Intel," said Stifel Nicolaus analyst Kevin Cassidy. "That was a surprise. Intel's Bay Trail and Haswell are coming in on top of where AMD was."

Read promised that tablets and mobile devices would form a "significant portion" of AMD's business in future. "We need to move and attack the new opportunities where the market's going, and that’s what we are doing."

AMD reported a net profit in the third quarter of $48 million, up from a loss of $157 million this time last year. Revenue was up to $1.46 billion, from $1.27 billion over the same period. Sales from AMD's Computing Solutions division, which includes PC chips, fell to $790 million, from $927 million in the third quarter of 2012.

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