AMD reports flat earnings, but sees future in Fusion

Revenue for the fourth quarter shows no growth, but full-year 2010 sees higher revenue and the chipmaker is betting on its APUs to give it a boost in 2011
Written by Jack Clark, Contributor

AMD has reported fourth-quarter revenue of $1.65bn and operating income of $413m, showing flat year-on-year and sequential growth for the quarter.

For the whole year 2010, the chipmaker saw a rise in revenue to $6.49bn (£4.06bn) and operating income to $848m, AMD said in an earnings announcement on Thursday. That compares with revenue of $5.40bn and operating income of $664m for 2009.

The quarterly results compare with fourth-quarter 2009 revenue of $1.65bn and operating income of $1.29bn, with income contributed by a legal settlement with Intel.

The California-based chipmaker's computing solutions business contributed the brunt of its fourth-quarter revenue, taking in $1.22bn, alongside operating income of $91m. That was followed by its graphics business, which had revenue of $424m and operating income of $68m. Other sectors contributed revenue of $6m and operating income of $254m.

The computing solutions group covers CPUs, the Fusion APUs (Accelerated Processing Units), chipsets and embedded processors for all segments, such as client and server. The graphics group represents graphic, video and multimedia products for use in desktops, notebooks and servers, as well as royalties received from game console systems that use the company's intellectual property. The other category represents benefits from the deconsolidation of AMD's chip manufacturing spinoff GlobalFoundries, intangible assets and the earnings of the handheld business unit.

Revenue was weighed down by a quarter-on-quarter drop in the average price of microprocessors, according to AMD.

"Gross margin [for the quarter] was 45 percent, down one percentage point sequentially primarily due to lower microprocessor average selling price," the company said in its earnings statement. "Computing solutions segment revenue was flat both sequentially and year-over-year."

In addition, the performance of some segments of the business weighed on revenue, the company said. In a conference call with analysts, AMD's interim chief executive Thomas Seifert noted that there was room for improvement in server chips.

"We were disappointed with our performance in the [server] segment in the fourth quarter," said Seifert, who replaced former chief executive Dirk Meyer after his resignation in January. "This is one of the areas where we see significant room for improvement, and that is one of the areas I would like to have been referred to when we talk about picking up the pace."

Fusion chips

For the next year, AMD is betting on its Fusion APUs, which combine a GPU and a CPU in the same chip. The company recently announced a number of design wins for the platform, including the use of it in a range of embedded systems.

AMD enters 2011 with significant momentum, amplified by the successful launch of our first Fusion APUs.
– Thomas Seifert, AMD

"AMD enters 2011 with significant momentum, amplified by the successful launch of our first Fusion APUs," Seifert said in the statement. "I am confident we can drive profitable growth based on the strength of new products we will bring to market."

Fusion units bear similarities to Intel's Sandy Bridge chip architecture. In response to a conference call question about how AMD expects to do against Sandy Bridge, the company's general manager for products Rick Bergman said, "We're thrilled about the increased attention towards the GPU and video capabilities of PCs, because at the end of the day AMD wins, whether it's a Fusion process or a discrete GPU."

By comparison, AMD rival Intel's fourth-quarter profits showed 21 percent year-on-year growth for its PC client group and 35 percent year-on-year growth for its datacentre group.

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