Advanced Micro Devices
) reported a loss of 14 cents per share for the fourth quarter of
2012, better than the Zacks Consensus Estimate 20 cents loss per
share, owing to solid expense management.
AMD generated revenues of $1.16 billion in the quarter, down
31.7% year over year. The quarter's revenue was roughly in line
with its guidance of a 9% sequential decline (at the mid-point).
A challenging macro-environment and growing consumer preference
for smartphones and tablets impacted the company's fourth quarter
Revenue by Segment
comprised 72% of AMD's sales in the last quarter, down 11.0%
sequentially and 37.0% from the year-ago quarter. The fourth
quarter marked a continuation of softening trends noticed in the
third, both as a result of macro conditions that impacted
business generated the remaining 28% of its sales, down 5.0%
sequentially and 15.0% from the year-ago quarter due to lower
unit volume shipments. The graphics business is currently under
some pressure due to the PC market slowdown.
Reported gross margin for the quarter was 15.4%, down
significantly from the year-ago quarter's 45.7%. Lower volumes
and unfavorable mix impacted margins in the last quarter.
Utilization of backend facilities also declined, another negative
for the quarter.
Operating expenses of $506.0 million decreased 15.8% year over
year from $601.0 in the year-ago quarter. However, the reported
operating margin was -36.5%, which shrunk from the year-ago
quarter of 4.2% on account of high cost of sales due to higher
research and development (R&D) expenses (as a percentage of
sales) as well as higher restructuring charges.
The quarter's GAAP net income was ($473.0) million or loss per
share of 63 cents, down from ($177.0) million or 24 cents earned
in the comparable quarter last year. Excluding restructuring
charges and intangible amortization charges, but including
stock-based compensation expenses non-GAAP net loss was $102.0
million or loss per share of 14 cents compared with $138 million
or 19 cents a share in the year-ago quarter.
AMD exited the fourth quarter with cash, cash equivalents and
marketable securities of approximately $1.0 billion, down from
$1.3 billion in the prior quarter. Trade receivables were $630.0
million, down from $683.0 million in the prior quarter.
During the quarter, AMD used $286.0 million of cash for
operations, spending $22.0 million on capex.
Management expects first quarter 2013 revenue to decline 9.0%
(+/- 3.0%) sequentially. Gross margin is expected to be flat
sequentially. Operating expenses are expected to be approximately
For 2013, operating expenses are expected to be approximately
$450.0 million, capital expenditures of approximately $150.0
Though AMD's bottom line beat the Zacks Consensus Estimate, it
posted a significant net loss due to weak demand and a slow PC
market. A more conducive market, adoption of new products,
position in graphics and good execution can pull the company out
of the current situation.
For this purpose, AMD has announced a massive restructuring to
align the cost structure with current demand trends. Management
currently expects the initiative to reduce the cost base by 25%.
Also, the company plans to diversify its business 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.
The company operates in a highly competitive market, which is
being increasingly cannibalized by tablets from well-established
players, such as
) among others.
) Ultrabook concept is going to further fragment the market,
giving strong competition to AMD. Currently, AMD has a
Zacks Rank #3 (Hold).
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