It's really starting to look bad for AMD, and that can only be said so many times before you have to ask if this company can survive.
On Tuesday, AMD reported a fourth-quarter loss of $364 million, a major downturn after reporting a profit of $89 million in the same quarter a year earlier. The one bit of good news is that much of that loss, $233 million, was for goodwill impairment, which is a lowering of the value of inventory. So it doesn't mean cash draining from the bank. Unfortunately, goodwill impairment often comes from damage to a brand name and subsequent lost sales.
The company's revenue of $1.24 billion was in line with Wall Street forecasts, but it was a decline of 22 percent from a year ago and 13 percent from the third quarter. That's going in the wrong direction. Chip vendors always have gone up from Q3 to Q4 for the Christmas season.
Adding to the misery, AMD said it expects revenue in the first quarter to be 15 percent lower than the fourth quarter. A declined from Q4 to Q1 is entirely in line with seasonal sales, but this was a much bigger drop. A 15% drop means revenue of about $1.05 billion. A survey of financial analysts by FactSet expected revenue in the range of $1.2 billion.
Then there's the departure of three top executives. John Byrne, head of the CPU group, CMO Collette LaForce and CSO Raj Naik have all left the company to pursue other interests. Their departures come just months after Lisa Su was appointed to the position of CEO. In this case, one analyst said not to read too much into it.
Patrick Moorhead, a former AMD executive and now principal at Moor Insights, told PC World these people had other opportunities lined up. "Lisa Su’s style and approach is very different from [former chief executive] Rory Read’s, and this is a natural impact when you get a CEO change with significantly different styles," he told PC World. It may not be an indication of the company's health but it's still three executives departing.
Before he left, Byrne told VentureBeat that AMD was staying out of the Internet of Things market because he felt there was no money to be made. In this one, I agree with him. Byrne felt there was still a lot of room for opportunity in the PC space, and he is right. The post-PC world never happened because people realized you can't use a phone as a PC. Now all we need is for Windows 10 to motivate purchases.
AMD's product roadmap, at least in CPUs, is not encouraging. Its cash cow, console sales, is expected to slow due to seasonality. The variable is a slowdown in sales because the consoles just aren't selling as well.
In desktop CPUs, the Carrizo chip is expected in the second quarter. The new APU comes with up to four Excavator architecture CPU cores as well as advanced graphics. Excavator is based on the Bulldozer design that debuted four years ago. Bulldozer was a botched design where two CPU integer cores shared a floating point core, thus hampering performance, and AMD has lived with this design for four years.
On the server side, the story is even weaker. There are no x86 Opteron plans for 2015, which means AMD has essentially given back the server market to Intel. About a decade ago, AMD held 20% of the server market. It's been all downhill since the mess with the Barcelona architecture in 2007.
Instead, AMD is going for the ultra-dense market powered by ARM chips. Its ARM-based Opteron, the A1100, is an impressive bit of work. There was so much that the ARM core needed to be server capable, like ECC and high throughput controllers, but AMD did it. Now the challenge is to get people to bite. The jury still seems to be out on these servers, although the potential market is certainly there.
I don't highlight these issues with any glee. The world needs AMD if only to keep Intel and Nvidia honest. I don't think for a minute that if AMD went away those two would get lazy. They are the most disciplined, focused and motivated companies in the Silicon Valley, but they still need a competitor, and a healthy one at that.
It might come down to an acquisition to keep AMD going. The two most obvious candidates are Samsung and Qualcomm, and neither has expressed any interest publicly. My big fear about that is those two companies would look at AMD as IP protection against Intel, Nvidia, and each other, rather than try to make AMD into the success it once was.