AMD Q414 results

[Qwertilot]

Why would AMD benefit from APU's to take chunks of the discrete graphics market?

Well, NV aren't going to be able to do x86 based APU's and AMD do still seem to be ahead of Intel in terms of integrated graphics. The latter might not last of course.

But if the graphical performance of iGPUs gets high enough that people buy them on that basis they'll have a fighting chance in that market. Like with the console contracts really.

Could really do with a more power efficient CPU tech of course. Can they get there in one piece?

 

[MiddleOfTheRoad]

I went and looked at your post history to try and get a better sense of where you are coming from. Do you realize that 99% of your posts are in AMD related threads? Do you own shares in AMD? I genuinely curious why the keen interest in the company.

+1

He's got a lot of posts -- by simply bashing AMD for the past few years. There is absolutely no way anyone with common sense would sugarcoat a loss of 3.4 billion dollars (like AMD lost in 2007) -- but he did so just to prove a distortion -- that AMD is currently on a financial death bed (which they aren't). They clearly aren't healthy, but they aren't dying either.

Two words: Due Diligence. If AMD was in actual serious trouble -- the accountants at Microsoft, Sony and Nintendo wouldn't have risked the billions of developing a game console by using AMD components. And Nintendo just committed to another billion dollar contract with them starting in 2016.

Even with revenue down -- AMD's total debt didn't budge this quarter. They aren't bleeding like they were 7 or 8 years ago..... Back then, they were losing around a billion dollars per quarter, for several quarters in a row. 2014 was indeed fairly ugly, but not so much from a historical perspective.

 

[krumme]

I went back and did more research on what "ATI" might be worth today and whether AMD overpaid. I did so by reviewing NVIDIA's performance.

What I found grosso modo is: sales have doubled; they've generated well over $6B of cash flow which they've used to pay dividends and buy back shares to the tune of over $4B; they've strengthened their cash balances by $2B; and their market cap today is $10B.

In my opinion, its not unreasonable to think had AMD left ATI alone, with almost no growth sales today would be in the $600-700MM range quarterly, they would have generated substantial cash flow over the years, and they'd still be worth at least $5B.

The narrative that AMD overpaid for ATI simply doesn't pass the smell test. At all.

Did they mismanage it? Absolutely, as only they know how.

Did that acquisition allow AMD to survive a few more years? Absolutely. Without GPU, AMD would have ceased to exist a few years ago because no APU and no console designs. Edit: they probably knew this when they bought it.

The scary part is if the old AMD is jettisoned, ATI can resume where it left off, growing the business, making money, generating cash flow, with the market cap of ?B. Two things stand in the way: the WSA and LTD holders. For LTD holders, if somebody makes the case to them, they won't stand in the way, why would they? Its a better business model. Global Foundries? Not so much.

Agree - that narrative is wrong.
One way to look at it is also how the gpu business is performing up untill this day on the r&d side showing good perf imo. Look where Intel gpu tech is today.
There was bad management at amd, and always have. But looking how bad things have turned is a result of the wsa and the ownership. Its really difficult to apply good management here and it goes for both gf and amd. Working on the relationship - developing business instead of talking problem and stage gates is very difficult.

I think the basic problem steems from the total lack of vision and strategy for the gf purchase. What is it? Is it a dream?
You remember the idea of a fab in the desert? Its was so damn sick - good it didnt happen or all aliens would come here and report it back home for fun and we would be famous in the entire galaxy.

 

[AnandThenMan]

Look where Intel gpu tech is today.

Given the money Intel has tossed at GPUs, very poor. The return on investment is horrid but luckily for Intel their CPUs are strong. If Intel had about the same CPU performance as AMD their products would be terrible. Put another way, Intel highly subsidizes their GPU development from the success of CPUs, AMD doesn't have this luxury.

 

[MiddleOfTheRoad]

Don't expect to see the answer to those questions.
Btw, he has got a permanent ban (as I presume) on SemiAccurate forum for that what he's doing here - trolling.
http://semiaccurate.com/forums/member.php?u=1281

Wow, the more people look into this -- the more his behavior makes sense. He just loves to stir up the Intel vs AMD battles.... I do find it remarkable that he decided to misquote me for his Anti-AMD rants (in his signature). Considering I buy around 70% Intel products, it's a bit ironic that he'd try to paint me out to be an AMD fanboy.

 

[MiddleOfTheRoad]

We had the same conversation two years ago, you and others were talking in the same tune of doom and how AMD were going for bankruptcy.



Since we don’t know what contracts they have or are going to make for 2015, all we should do now is wait and see how they will perform the coming quarters.

Let me tell you about my first job in Tech Support. My co-worker at the time, Carlos, predicted that AMD would be out of business within a year. Intel just trademarked the Pentium name -- according to him, "No one is ever going to buy a 486 ever again. The performance was just too good on these new Pentiums.... AMD will be out of business in a few months." That conversation was now 21 years ago. The products keep changing, but the gloom continues. I know AMD, Matrox and VIA aren't going anywhere -- but people on tech forums love to plan their funerals.

 

[cytg111]

Wow, the more people look into this --...

- and alternative handles, I am pretty sure it is more than one.

 

[sm625]

The ATI purchase was clearly a bad mistake. We all know it now. It is kind of surprising how bad it went, but it does make sense.

1) Integrating a CPU and a GPU is a costly endeavor, one you would only undertake if you are sure to be able to bring smaller more profitable form factors to the market. But that's never been AMD's forte. They bring budget parts to the market, not state of the art highly integrated parts. Indeed, budget CPUs are on the exact opposite end of the spectrum vs highly integrated compact designs, just like Microsoft Surface is on the opposite end of the spectrum as a generic Mid Tower.

2) The integration has thus far failed. There has been no measurable performance gained. You can get better perf/watt using intel/nvidia solutions. That is an undeniable failure. After 5 years, AMD should have had a completely new set of x86 extensions for its GPU. It's GPU should have been as closely integrated as its FPU. They should have written a game engine using these new extensions and delivered 10x the FPS per watt. None of that happened. It appears, they didnt even try. So there was always zero chance of success.

3) By shifting their focus toward Fusion, they lost sight of what was really important. This allowed a subpar CPU core design to slip through the cracks and out the door, ultimately costing them billions. We cannot say for certain that they would have made a better design had they not been distracted by the Fusion concept, but we can say for sure that the ATI purchase was surely a huge distraction.

 

[pablo87]

As a comment on APU's, I have not been impressed by AMD's efforts. They always seem to be bandwidth limited. Its probably heavily influenced by OEM's who just want to hit price points (they're all still bundling Winchester HDD's). Hopefully Carrizo is better but how many times have we heard this before.

Plus when you go to buy, the shelves are replete with various generations. And it seems they don't actually destroy obsolete SKU's but use these written down parts to get design wins - I know they did this in the past. Sheer folly. Its a big problem - most of the Q4 conference call revolved around inventory.

Also, I did a bit more research and Kumar told Hans Mosemann of Raymond James at their analyst conference with respect to Global Foundries per the transcript: "its just under $1.2B. We're on track to go ahead and take that from Global Foundries". But on the Q4 earnings call 6 weeks later we have this gem.

"But from a purchases standpoint, the way it works in WSA is the wafers get delivered, and like I said, against the 1.2 that we expected when we closed 2014 WSA, we purchased $1 billion worth of wafers. As we ended 2014, we made a mutual decision to reduce the supply and purchases based on market conditions, and the 2014 WSA is complete."

Where did those $200M worth of wafers go???

More from Raymond James conference: "And of course,The relationship with GlobalFoundries both at the GlobalFoundries level and with our partners in Abu Dhabi is the best in the history of the relationship. You know I’ve been involved in this right from the inception of when GlobalFoundries was formed in 2009, but the relationship is just great at this point. From an execution standpoint, GlobalFoundries execution is significantly better today than it was even a year ago, and as you know they have brought in new management team there and I think that’s doing really well for us from a Foundry partner standpoint. But we do our business with them. Everything is playing out even for 2015. We are on track in 2013 and 2014. We’ve been very fortunate with our partner in GlobalFoundries."

I understand now why somebody was buying June puts.

 

[III-V]

Already covered that.

My mistake. Regardless, there are plenty of players that licensed their GPU tech. ARM, and Imagination Technologies to name a couple, and a couple is enough. Heck, they could have licensed from ATI itself -- did that thought never occur to you?

 

[pablo87]

Agree - that narrative is wrong.
One way to look at it is also how the gpu business is performing up untill this day on the r&d side showing good perf imo. Look where Intel gpu tech is today.
There was bad management at amd, and always have. But looking how bad things have turned is a result of the wsa and the ownership. Its really difficult to apply good management here and it goes for both gf and amd. Working on the relationship - developing business instead of talking problem and stage gates is very difficult.

I think the basic problem steems from the total lack of vision and strategy for the gf purchase. What is it? Is it a dream?
You remember the idea of a fab in the desert? Its was so damn sick - good it didnt happen or all aliens would come here and report it back home for fun and we would be famous in the entire galaxy.

Hey Krumme, its sad. Is the fab in New York even up and running? I don't believe they are in full production yet. Its a domino GF -> AMD -> ATI -> employees -> customers -> posters!!!

 

[AnandThenMan]

Heck, they could have licensed from ATI itself -- did that thought never occur to you?

Still need a team of software engineers, a hardware team and whole host of other things. I take it you missed this post:

....you do buy it to get the team, the institutional knowledge, the processes, and the flows to architect, prototype, verify, layout, and productize complex chips. It's like buying a move in ready house, vs buying some concrete and lumber at Home Depot. Same materials, but not the same thing.

 

[III-V]

Still need a team of software engineers, a hardware team and whole host of other things. I take it you missed this post:

Whatever it is, your financial investment is tremendously smaller. I cannot believe you guys are even arguing this.

Well, actually I can, given that just just about everybody here argues along "party lines."

 

[AnandThenMan]

Whatever it is, your financial investment is tremendously smaller. I cannot believe you guys are even arguing this.

Put a dollar value on it, let's see it. You'll have to consider how much it would cost to start from scratch and do everything in house from planning stage to product, instead of buying ATI and having all of that from the get go. And also how long it would take.

Well, actually I can, given that just just about everybody here argues along "party lines."

Are you accusing me of bias? Because I'm looking at this as realistically as I can, I see absolutely no future for AMD without ATI, and don't see it even remotely feasible to count on a licensing model, then bringing in all the people from the outside. Not in a reasonable time frame or even a reasonable cost.

BTW in 2006 who was willing to license GPU tech to AMD?

 

[CHADBOGA]

Don't expect to see the answer to those questions.
Btw, he has got a permanent ban (as I presume) on SemiAccurate forum for that what he's doing here - trolling.
http://semiaccurate.com/forums/member.php?u=1281

SemiAccurate forum is the new home for the deranged AMD fan & Moderator, now that AMDZone is a ghost town.

Anyone who tries to bring reason to their crazed anti-Intel, anti-Nvidia rants, runs the risk of being banned.

No one who cares about their credibility, should be using SemiAccurate's actions as some kind of guide.

 

[AnandThenMan]

SemiAccurate forum is the new home for the deranged AMD fan & Moderator, now that AMDZone is a ghost town.

Anyone who tries to bring reason to their crazed anti-Intel, anti-Nvidia rants, runs the risk of being banned.

No one who cares about their credibility, should be using SemiAccurate's actions as some kind of guide.

How often do you go there? You seem to know a lot of their forums (I never go there). Totally forgot about AMDZone, how do you know it's not active anymore?

 

[Sweepr]

SemiAccurate forum is the new home for the deranged AMD fan & Moderator, now that AMDZone is a ghost town.

Anyone who tries to bring reason to their crazed anti-Intel, anti-Nvidia rants, runs the risk of being banned.

No one who cares about their credibility, should be using SemiAccurate's actions as some kind of guide.

+1
Just take a look at their threads @ CPU section, it's almost intimidating to mention Intel/Nvidia there.

 

[ShintaiDK]

The S/A owner isnt exactly known for his objectivity.

 

[mrmt]

NVIDIA I believe was also worth the same or similar in 2006/2007 that it is now. Point being, they invested $5B, what would they have gotten out of it had they managed it properly? A lot.

Cash flow, intellectual property without which AMD was doomed, and they could still get their capital back today, had they managed it properly.

Pablo,

I think we are saying different things:

- you are saying that ATI had the potential to reach 5 billion in value, which I don't dispute.

- I am saying that ATI didn't generate enough cash to offset the 5 billion AMD paid for it, which I think you don't dispute.

I think it the only valid metric to judge whether AMD overpaid or not is how many cash the business generated, not how much the business would be worth if well managed by a competent management team.

I agree that ATI was a great business, and if were not for the typically incompetent AMD management they would thrive, but they didn't. The cash AMD spent they never recovered.

 

[AnandThenMan]

I think it the only valid metric to judge whether AMD overpaid or not is how many cash the business generated, not how much the business would be worth if well managed by a competent management team.

This is valid but also 20/20 hindsight. The argument is should AMD have purchased ATI in 2006, not whether AMD leveraged the deal effectively. We can all agree that on the latter, they did not. Even if they did overpay but were successful using the IP etc. then it would simply take longer to see a ROI.

 

[cbn]

And don't say AMD could just license the tech, from who?

Nvidia, Imagination technologies, ARM are the ones I know off the top of my head.

 

[Phynaz]

How often do you go there? You seem to know a lot of their forums (I never go there). Totally forgot about AMDZone, how do you know it's not active anymore?

This reminds me, I should go check out how the Zoner's are spinning this.

 

[mrmt]

This is valid but also 20/20 hindsight. The argument is should AMD have purchased ATI in 2006, not whether AMD leveraged the deal effectively. We can all agree that on the latter, they did not. Even if they did overpay but were successful using the IP etc. then it would simply take longer to see a ROI.

You can only say that bulldozer is a failure with 20/20 hindsight, but the real seeds of the failure were already there in the scope definition phase.

M&A are big projects, they demand a high level of work and information and will still carry a high level of uncertainty by the time the project reach the go/no-go moment. You can only judge whether it was a success or not only after a few years after the conclusion of the project, which is when you have the financial results and the other M&A objectives in place.

In the end, can AMD look back and say that they reached the acquisition objectives and the financial results were in line with projections that supported the 5 billion value? I guess the answer is no, and if so, AMD overpaid and the acquisition was a failure.

 

[AnandThenMan]

Nvidia, Imagination technologies, ARM are the ones I know off the top of my head.

And then what, they have the IP now all they need is the resources to make it happen. If only they could buy a company that gave them everything they needed.

In the end, can AMD look back and say that they reached the acquisition objectives and the financial results were in line with projections that supported the 5 billion value? I guess the answer is no, and if so, AMD overpaid and the acquisition was a failure.

It's clear you've made up your mind long ago regardless, there is no point discussing it further.

 

[MiddleOfTheRoad]

Still need a team of software engineers, a hardware team and whole host of other things. I take it you missed this post:

I agree that AMD needed a GPU company.... Personally I wished they had bought S3 Graphics instead. The Savage wasn't too bad (although I know the earlier Virge was complete trash). There would have been 5 Billion of less debt on AMD's balance sheet and they'd still have the GPU tech. I know hindsight is always 20/20, if I had been in charge of AMD at the time I would have shopped around a little more.

Look at the difference in cost. VIA bought S3 for $323 Million, AMD paid $5.4 Billion. ATi did indeed make better video cards at the time, but I'm not sure they were 5 billion dollars better. I think AMD could have scaled the Savage to higher performance levels over time. HTC just recently bought S3 from VIA, so it appears that S3 could have been theoretically available at the time of the ATi acquisition (for a much lower cost than ATi's cost).