Advanced Micro Devices
) reported earnings of 4 cents per share for the third quarter of
2013, above the Zacks Consensus Estimate of 2 cents per share,
owing to solid execution and cost control management.
However, the higher-than-expected decline in AMD's larger core
PC business led to a 6.6% drop in share price in after-hours
AMD generated revenues of $1.46 billion in the quarter, up
25.8% sequentially and 15.1% year over year. The sequential
increase was better than management's expectations of 22.0% (+/-
3.0%) and the highest sequential revenue growth in the past five
years. The increase was driven by a 109.7% increase in the
Graphics and Visual Solutions segment, primarily from the ramp up
of semi-custom System-on-Chips
Revenues by Segment:
comprised 54% of AMD's sales in the last quarter, down 6.1%
sequentially and 14.8% from the year-ago quarter. The decline was
due to decreased notebook and chipset unit shipments, partially
offset by an increase in desktop unit shipments.
and Visual Solutions
business generated the remaining 46% of its sales, up 109.7%
sequentially and 96.2% from the year-ago quarter. The increase
was largely driven by strong growth in the semi-custom
Reported gross margin for the quarter was 35.7%, down 380 bps
sequentially but up 480 bps from the year-ago quarter. The
third-quarter gross margin included a $19 million benefit from
sales of certain previously reserved products.
Operating expenses of $426.0 million decreased 18.5% from
$523.0 in the year-ago quarter. Also, as a percentage of sales,
both research and development (R&D) as well as marketing,
general and administrative expenses declined. As a result,
reported operating margin of 6.5% was significantly above the
year-ago quarter margin of (10.3%).
The quarter's GAAP net income was $48.0 million or earnings
per share of 6 cents compared with net loss of $157.0 million or
loss of 21 cents per share reported in the comparable quarter
last year. Excluding restructuring charges and intangible
amortization charges but including stock-based compensation
expenses, non-GAAP net earnings were $31.0 million or earnings
per share of 4 cents compared to a net loss of $150 million or
loss of 20 cents a share in the year-ago quarter.
AMD exited the third quarter with cash, cash equivalents and
marketable securities of approximately $1.06 billion versus $968
million in the prior quarter. Trade receivables were $873.0
million, up from $670.0 million in the prior quarter.
During the quarter, AMD generated $21.0 million from cash for
operations, spending $15.0 million on capital expenditures. Free
cash flow was $6 million during the quarter.
Management expects fourth-quarter 2013 revenues to increase
5.0% (+/- 3.0%) sequentially. Non-GAAP gross margin is expected
to be 35%. Operating expenses are expected to remain flat
sequentially at approximately $450.0 million.
For the full year 2013, capital expenditures are expected to
be approximately $110 million, down from its prior guidance of
AMD's top-line numbers for the quarter were better than its
guidance, supported by new products and increased demand for the
company's new semi-customSoCs. The company's bottom line also
beat the Zacks Consensus Estimate. 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.
Additionally, the company is providing chips for game consoles
to lessen the company's dependence on the declining personal
computer market. Management said that the company shipped
millions of semicustom SoC products to both
) for their soon-to-be-launched next generation game
We believe AMD is on the right track. It is trying to position
itself strongly in the gaming market, which holds enough
potential for growth in the next few quarters.
Also, during the quarter, the company made good progress into
new embedded markets, including communication, industrial and
gaming, among others. It expects to increase revenue contribution
from its 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 has a Zacks Rank #2 (Buy). Other stocks that
have been performing well and are worth a look include
(AVGO). All these stocks carry a Zacks Rank #1 (Strong Buy).
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