Weak PC Market Hits AMD Again - Analyst Blog
23 1월 2013 - 11:59PM
Zacks
Advanced Micro Devices (AMD) 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.
Revenue
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
results.
Revenue by Segment
Computing Solutions 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 consumer spending.
AMD’s Graphics 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.
Operating Results
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.
Balance Sheet
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.
Guidance
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
$495.0 million.
For 2013, operating expenses are expected to be approximately
$450.0 million, capital expenditures of approximately $150.0
million.
Our Take
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 Apple (AAPL), Samsung,
Microsoft (MSFT), Hewlett-Packard
(HPQ) and Dell (DELL) among others.
Intel’s (INTC) 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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