AMD CEO says consumer PC market to see slight decline in 2015

Advanced Micro Devices chief executive Lisa Su said that she believes that the consumer PC market — where AMD is overly dependent — could see a slight decline in 2015.

In a call with analysts, Su said that AMD suffered an earnings shortfall (breakeven results) because of a build-up of inventory for consumer PC desktop chips in the fourth quarter, and that AMD was hit harder by this problem because it is overly dependent on that part of the PC market. She noted there was weakness in desktop PC sales in particular, resulting in higher-than-expected inventory pile-ups.

After 100 days as CEO, Su said that comments from customers have been consistent.

She said, “AMD is at our best when we deliver differentiated technology for our customers. We must think differently in 2015 about our market path and our investment priorities.”

Earlier today, AMD reported that it slightly missed Wall Street’s expectations for the fourth quarter by a penny a share, but its revenues were on target.

Above: AMD CEO Lisa Su

Image Credit: AMD

AMD’s earnings are closely watched as a bellwether for low-cost computers. The company is the No. 2 maker of PC microprocessors, and it is also one of the “big two” graphics chip makers for PCs. The company has been trying to adapt to the shift toward mobile by creating alternative chips in custom markets where Intel, its giant rival, doesn’t play.

On an adjusted basis, AMD reported net income of breakeven, or 0 cents a share, on revenue of $1.24 billion in the quarter. Analysts had expected earnings of 1 cent per share and $1.24 billion in revenues. A year ago, AMD posted earnings of 6 cents a share on revenue of $1.59 billion.

In after-hours trading, AMD’s stock is flat at $2.24 a share.

In the previous quarter, AMD missed its targets because of weak consumer PC sales — and because Intel had blanketed the market with a lot of chips.

AMD also has $362 million in one-time write-downs in the fourth quarter, and that dragged down actual net income. AMD took $232 million in write-offs on the value of acquisitions. It also took a one-time $71 million special write-off for severance pay and a $58 million inventory adjustment charge.

AMD recently laid off about 700 employees, or about 7 percent of its workforce. And it also saw the departure of a trio of executives: John Byrne, the senior vice president and general manager of the computing and graphics business; Colette LaForce, chief marketing officer; and Raj Naik, chief strategy officer.

Besides PC processors, AMD makes graphics chips, embedded processors, enterprise chips, and semi-custom chips such as game console processors. AMD supplies chips to the Nintendo Wii U, Microsoft Xbox One, and Sony PlayStation 4 consoles. One of AMD’s big projects is creating ARM-based server chips for the enterprise, another area where it hopes to offer high-performance, low-power chips to contend with Intel’s faster-but-power-hungry server chips. AMD is expecting ARM-based server system launches this year.

Last fall, AMD appointed Su as its new chief executive in a surprise change, replacing Rory Read, who had been on the job for three years.

On Oct. 8, Read, 52, stepped down as CEO. Su, 44, was the No. 2 executive, or chief operating officer, under Read. She is the newest female top executive at a major tech company, and she is the first female CEO at 45-year-old AMD.

But she faces a tough challenge. Intel’s executives believe that they gained market share in the third quarter against AMD, which is the perennial runner-up to Intel in the PC microprocessor business. But AMD has branched out to dominate some sectors, such as processors for video game consoles. Since 2012, AMD has cut its operating costs by 30 percent and kept its cash at about $1 billion. It has also cut back on staff and focused its chip design efforts. In an interview with VentureBeat, Su said her company won’t walk in Intel’s shadow.

Read joined AMD three years ago after leaving the No. 2 job at one of AMD’s biggest customers, Lenovo. He hired Su in 2012 and appointed her the head of various business units. More recently, she was appointed chief operating officer responsible for AMD’s business units, sales, global operations, and infrastructure enablement teams.

AMD has about $2.2 billion in debt.

For the fourth quarter, AMD itself had expected revenue to decrease 13 percent from the $1.43 billion in the third quarter.

In the full year, AMD reported a net loss of $403 million on revenue of $5.51 billion, compared to a loss of $83 million on 4 percent lower revenue a year ago. AMD said that Sony and Microsoft have sold nearly 30 million consoles to date.