Advanced Micro Devices
) reported earnings of 2 cents per share in the first quarter of
2014, exceeding the Zacks Consensus Estimate by a couple of
AMD generated revenues of $1.40 billion in the quarter, down
8.8% sequentially but up 28.4% year over year. However,
first-quarter revenues were better than the Zacks Consensus
Estimate of $1.34 billion and management's expectations of 16.0%
(+/- 3.0%) revenue decline driven by healthy demand for Radeon
GPUs and semi-custom gaming APUs.
Revenues by Segment:
comprised 48% of AMD's sales in the last quarter, down 8.2%
sequentially and 11.7% from the year-ago quarter. The decline was
due to decreased desktop and client unit shipments, partially
offset by increased notebook revenues.
and Visual Solutions
business generated the remaining 52% of the sales, down 15.1%
sequentially and soared 117.8% from the year-ago quarter. The
year-over-year increase was largely driven by semi-custom SoCs.
Management stated that GPU revenues increased sequentially as
well as year over year due to strong demand for R7 and R9 series
Reported gross margin for the quarter was 34.9%, up 10 basis
points (bps) sequentially but down 600 bps from the year-ago
quarter. The first-quarter gross margin included a $4 million
benefit from sales of certain previously reserved products.
Operating expenses of $438.0 million decreased 19.3% from
$543.0 in the year-ago quarter. Also, as a percentage of sales,
both research and development (R&D) and marketing, general
and administrative expenses declined. As a result, reported
operating margin of 3.5% compared favorably with the year-ago
quarter's margin of (9.0%).
The quarter's GAAP net loss was $20.0 million or loss of 3
cents per share compared with a net loss of $146.0 million or 19
cents per share reported in the comparable quarter last year.
Excluding legal charges and intangible amortization charges but
including stock-based compensation expenses, non-GAAP net
earnings were $12.0 million or 2 cents per share versus a net
loss of $94 million or loss of 13 cents in the year-ago
AMD exited the first quarter with cash, cash equivalents and
marketable securities of approximately $9.02 billion versus $1.10
billion in the prior quarter. Trade receivables were $840.0
million, up from $832.0 million in the prior quarter.
Total debt (short- and long-term) in the quarter was $2.14
billion, up from $2.06 billion in the previous quarter.
Additionally, the company paid $200 million cash to
GlobalFoundries related to the reduction of the "take or pay"
wafer obligation commitments for 2012.
During the quarter, AMD used $204.0 million from cash for
operations, spending $21.0 million on capital expenditures. Free
cash flow was negative $225.0 million in the last quarter.
Management expects second-quarter 2014 revenues to increase
3.0% (+/- 3.0%) sequentially. Non-GAAP gross margin is expected
to be 35.0%. Operating expenses are expected to be approximately
For full-year 2014, management expects revenues to increase
year over year, non-GAAP operating expenses in the range of
approximately $420.0-$450.0 million per quarter, taxes of
approximately $3.0 million per quarter and capital expenditures
of approximately $120.0 million.
AMD's top line for the quarter surpassed its guidance,
supported by new products and increased demand for new
A more conducive market, increased game console wins, adoption of
new products, position in graphics and good execution are
expected to pull the company out of the weak PC market.
We believe AMD is on the right track. Last quarter, the
company witnessed strong demand for AMD-powered Microsoft and
Sony gaming consoles. It is trying to position itself strongly in
the gaming market, which has enough potential to grow over the
next few quarters.
Also, during the quarter, the company made good progress in
embedded markets, including communication, industrial and gaming,
among others. It expects to further increase revenue contribution
from the embedded business and increase market share. AMD's new
APUs, which power a number of thin and light-touch notebooks are
expected to drive strong double-digit sequential increase in
mobile processor unit shipments.
Currently, AMD sports a Zacks Rank #1 (Strong Buy). Other
stocks that have been performing well and are worth a look
). While Freescale Semiconductor and Rambus have the same Zacks
Rank as AMD, Intel has a Zacks Rank #2 (Buy).
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