AMD CEO says buzz and interest in VR could boost PC market in 2016

Advanced Micro Devices chief executive Lisa Su said that the “buzz and interest” in virtual reality headsets could help boost PC industry sales in 2016.

“The PC gaming market strength helped fuel a richer graphics processing unit (GPU) mix and improved demand for our high-end Radeon R9 series in the quarter,” Su said in a conference call with analysts. “We expect this momentum to continue throughout 2016 as Oculus and HTC begin shipping consumer-ready VR headsets.

“The buzz and interest in VR is an exciting trend that is focusing the software industry’s attention, and some of its brightest minds, back on the PC platform. While the initial wave of VR will be focused on gaming, an increasing number of developers see VR as the most significant advancement in how we interact with technology since the introduction of the mouse and graphical user interface. Most importantly, these breakthrough software experiences will only be enabled on high-performance, energy-efficient GPUs.”

Su acknowledged that 2015 was a challenging year for AMD from a financial perspective. In Q1, weakness in China could be a factor for a relatively poor outlook for the first quarter.

But she was upbeat about 2016. She said demand for game consoles looks good for 2016, and the company expects to ship a new semi-custom chip in the second half of 2016.

“We had strong double-digit sequential percentage growth in mobile APU sales driven largely by increased ‘Carrizo’ shipments and good sell-through of AMD-based PCs on Black Friday,” Su said.

Su said that in the second half of 2015, AMD’s commercial accelerated processor unit (APU) sales picked up, with shipments increasing 15 percent versus the first half.

“We believe we can continue to grow our commercial shipments based on the high-volume wins we are securing across both large enterprises and the public sector,” Su said.

AMD said it shipped more than 50 million semi-custom APUs during 2015 for Sony and Microsoft, but revenue from the segment — which also includes enterprise and embedded chips — fell percent in the year.

Su said that AMD expects to regain GPU share in 2016 as it launches its new Polaris GPUs, which emphasize performance per watt. AMD also hopes to regain share in high-performance desktops with its code-named Zen products, including a Summit Ridge CPU.

AMD reported earnings that slightly beat Wall Street’s expectations for the fourth quarter. This period was weaker due to seasonal slowness in game console chips, but sales were strong for processors and graphics chips for PCs.

The company continues to lose money and struggle with tough competition from Intel, the world’s biggest chip maker, and declining sales of PCs. The stock is falling in after-hours trading because the company is being very cautious about its first-quarter outlook.

The company reported a non-GAAP net loss of $79 million, or 10 cents a share, on revenues of $958 million. That’s not bad, given the seasonal trend and a general weakening of demand for PCs in the smartphone era.

Analysts had expected AMD to lose 12 cents a share on revenue of $954 million. AMD makes microprocessors and graphics chips for PCs. It also makes accelerated processing units, which combine processing and graphics on the same chip. AMD has been buoyed in recent quarters by sales of semi-custom chips, or APUs that are used in game consoles from Sony, Microsoft, and Nintendo. AMD itself had expected fourth quarter revenues to fall 10 percent from the third quarter due to a seasonal decline in semi-custom chip sales.

For the full year, analysts were expecting earnings per share of 54 cents. For all of 2015, AMD reported a net loss of 54 cents, or $419 million, on revenue of $3.99 billion (down 28 percent from a year earlier). That compares to net income of 16 cents, or $132 million, on revenue of $5.51 billion.

The overall chip industry was expected to fall off 3.5 percent for 2015, according to the Semiconductor Industry Association.

In after-hours trading, AMD’s stock is down 7 percent to $1.82 a share.

In the previous third quarter, AMD had a $65 million write-down of inventory, and it raised funds by entering into a $436 million joint venture with Nantong Fujitsu Microelectronics for test and assembly of chips. Under that deal, 1,700 AMD employees are moving to the joint venture.

For the first quarter, AMD said, revenue is expected to fall 14 percent from the fourth quarter, largely due to the normally weak game console season and a cautious macro environment in China.