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AMD makes a profit, until you account for GlobalFoundries

by Scott Bicheno on 15 October 2010, 12:30

Tags: AMD (NYSE:AMD), GLOBALFOUNDRIES

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One of the more challenging tasks for a technology business journalist is covering earnings announcements, and that's because there are two ways of looking at the figures: GAAP (generally accepted accounting principles) and non-GAAP. Despite the name, both are ‘generally accepted'.

This gets especially convoluted with AMD due to its system of accounting for its stake in spun-off chip manufacturing operation - GlobalFoundries (GF). But the long and short of it is that, for the second quarter running, AMD made a profit, but losses attributed to GF dragged it into the red.

AMD managed revenue of $1.62 billion, two percent down on the previous quarter, but 16 percent up year-over-year. This translated to an operating income of $128 million, but after interest payments of a whopping $56 million, among other expenses, the net operating income was $68 million.

Then came AMD's equity in the net income of GF, which amounted to a loss of $186 million, and resulted in a net loss for the quarter of $118 million.

The strange consequence of all this is that the non-GAAP EPS (earnings per share) number of $0.15 actually far exceeded analyst expectations of $0.06. AMD's shares were up 4.5 percent in pre-market trading.

"AMD's third quarter performance was highlighted by solid gross margin and a continued focus on profitability, despite weaker than expected consumer demand," said Dirk Meyer, AMD president and CEO.  "Our strategy to deliver platforms with superior visual experiences continues to resonate.  We look forward to building on this momentum when we begin shipping our first AMD Fusion APUs later this quarter."

There was a fair bit of talk about netbooks and tablets in the Q&A. Meyer said he thought tablets were having some cannibalization effect on both the netbook and notebook markets but: "we still believe in the long term that the tablet form-factor is accretive to the market opportunity for companies like AMD."

"I expect we're going to see tablets of various form-factors and thickness over time," continued Meyer. "A tablet would optimally have a maximum power dissipation of 2-3W, which is a little more than half of what a fan-less netbook would tolerate. Although I expect that customers will take products designed with the netbook in mind and put them in tablets, and I think you'll see AMD-based solutions in tablets over the next couple of years for that reason.

"We'll devote significant R&D energy towards [the tablet market] when it's big enough to justify that investment. Frankly we're still so small in the notebook market that it doesn't make sense for us to turn R&D dollar spending towards the tablet market yet."

 

GAAP Financial Results

 

Q3-10

Q2-10

Q3-09

Revenue

$1.62B

$1.65B

$1.40B

Operating income (loss)

$128M

$125M

$(77)M

Net loss attributable to AMD common stockholders/loss per share

 

$(118)M/$(0.17)

 

$(43)M/$(0.06)

$(128)M/$(0.18)

 

Non-GAAP Financial Results

 

Q3-10

Q2-10

Q3-09

Revenue

$1.62B

$1.65B

$1.40B

Operating income

$144M

$138M

$47M

Net income / Earnings per share

$108M/$0.15

$83M/$0.11

$2M/$0.00

 



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