Advanced Micro Devices Inc. narrowed its losses in the first quarter of 2014 as revenue grew in the double-digits, driven by strong growth in its graphics and visual solutions segment.
The Sunnyvale, Calif.-based chipmaker was in the red with a net loss of $20 million compared with net income of $89 million in the fourth quarter of 2013, but that was sharply lower than last year's loss of $146 million. AMD posted a 28% gain in first-quarter revenue of $1.4 billion, compared with $1.09 billion a year ago, and a 12% decline from $1.59 billion in the seasonally stronger fourth quarter of 2013.
The sequential decline in revenue was better than the company's expectations "due to healthy demand for the newest Radion GPUs and semi-custom gaming APUs," said Rory Read, AMD president and chief executive, in a conference call with analysts following the earnings release on April 17.
In the graphics and visual solutions segment, revenue of $734 million decreased 15% sequentially, but jumped 118% from the year-ago period, driven by strong sales for its semi-custom SoCs and GPUs, specifically the AMD Radeon R7 and R9 product lines. Operating income was $91 million, compared with $121 million in the fourth quarter of 2013 and $16 million a year ago.
Read attributes the segment's revenue jump to strong demand for AMD-powered Microsoft and Sony game consoles. He expects continued momentum in its semi-custom SoC business this year as AMD is close to securing two more design wins in the game console market.
Business conditions, however, in the computing solutions segment, which includes x86 microprocessors, APU chipsets, embedded processors, and dense servers, weren't as robust, with an 8% sequential decline and 12% year-over-year drop in revenue of $663 million. The company blamed a decrease in client unit revenue and desktop and chipset unit shipments for the falloff. Operating losses narrowed to $3 million from $7 million in the fourth quarter of 2013 and $39 million in the year-ago period.
While the PC market remains challenging, the market decline is slowing and stabilizing, according to AMD's management team, which expects overall PC unit shipments to decline 7% to 10% this year.
Meanwhile, gross profit margins were 35%, flat sequentially but sharply lower than 41% a year. Microprocessor ASPs were flat sequentially and decreased slightly year-over-year.
For the second quarter, AMD expects revenue to grow 3%.
Read is optimistic about the direction of AMD and believes the company's diversification strategy is working. "We are building a foundation for continued profitability and growth as we transform AMD," he said, adding that the company is on track to generate nearly 50% of its revenue from high-growth markets, including embedded, semi-custom, dense servers, professional graphics, and ultra-low-power clients, by the end of 2015.