AMD R7 and R9 roadmap

Carried by consoles, AMD returns to profitability

As CEO Rory Read promised, AMD returned to profitability in the third quarter, driven by its success in the game console market.

AMD reported net income of $48 million on revenue of $1.46 billion, versus a loss of $131 million in the same period last year on revenue of $1.27 billion.

Analysts had expected AMD to turn a profit, barely, with a consensus forecast of 2 cents per share, according to analyst estimates compiled by Yahoo Finance. They expected AMD to see sales of $1.42 billion.

Executives had previously said that the third quarter would be critical for AMD, with Read pegging it as the time when his company would return to profitability. “Looking ahead, we will continue to deliver a strong value proposition to our established customers and also reach new customers as we diversify our business,” Read said in July.

Although AMD’s Computing Solutions business declined 15 percent year-over-year to $790 million, revenue in its Graphics and Visual Solutions business nearly doubled, growing 96 percent to $671 million. That growth was predicated upon semi-custom silicon designed for the three major game consoles made by Microsoft, Nintendo, and Sony.

AMD’s GPU revenue for PCs dropped, the company said; average prices fell as well.

“AMD returned to profitability and generated free cash flow in the third quarter as we continued to successfully execute the strategic transformation plan we outlined a year ago,” Read said in a statement. “We achieved 26 percent sequential revenue growth driven by our semi-custom business and remain committed to generating approximately 50 percent of revenue from high-growth markets over the next two years. Developing industry-leading technology remains at our core, and we are in the middle of a multi-year journey to redefine AMD as a leader across a more diverse set of growth markets.”

As The New York Times’ Quentin Hardy recentlypointed out, the technology industry is increasingly taking its cues from companies like Samsung and ARM, rather than the traditional PC-centric companies like AMD and Intel. Neither of the latter two companies has seriously penetrated the market for handhelds, although Intel’s “Bay Trail” Atom chips are starting to power a new generation of tablets.

AMD, however, has struggled to find its way forward, and management has turned to a somewhat scattershot collection of high-margin opportunities, such as microprocessors for the tablet market and “microservers,” as well as more traditional footholds in the PC graphics market and notebooks.

AMD said that it expected fourth-quarter revenue would grow 5 percent, plus or minus 3 percent, on a sequential basis. That would be a notable improvement over the $1.16 billion in revenue the company tallied in the fourth quarter of 2012.

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