10-KPeriod: FY2014

ADVANCED MICRO DEVICES INC Annual Report, Year Ended Dec 27, 2014

Filed February 19, 2015For Securities:AMD

Summary

Advanced Micro Devices Inc. (AMD) filed its 2014 10-K on February 18, 2015, detailing its performance and strategic direction. The company reported a net revenue of $5.5 billion for 2014, a slight increase from $5.3 billion in 2013, driven by a significant 51% surge in its Enterprise, Embedded and Semi-Custom segment. This growth was primarily attributed to higher semi-custom System-on-Chip (SoC) sales, particularly for gaming consoles. However, this was partially offset by a 16% decline in the Computing and Graphics segment, largely due to decreased sales of desktop processors and chipsets amid ongoing PC market challenges. AMD continues its strategic transformation to increase revenue from high-growth adjacent markets, reporting that approximately 40% of its 2014 revenue was derived from these areas, moving towards its goal of 50% by the end of 2015. The company also made progress in strengthening its financial position by managing its debt maturity schedule throughout the year.

Financial Highlights

56 data points
Beta

Revenue

$5.51B

33.4% Gross Margin

Net Income

-$403.00M

-7.3% Net Margin

EPS (Diluted)

$-0.53

Total Assets

$3.77B

Cash & Equivalents

$805.00M

Free Cash Flow

-$193.00M

Financial Statements
Beta
Revenue$5.51B
Cost of Revenue$3.67B
Gross Profit$1.84B
R&D Expenses$1.07B
SG&A Expenses$604.00M
Operating Income-$155.00M
Interest Expense$177.00M
Net Income-$403.00M
EPS (Basic)$-0.53
EPS (Diluted)$-0.53
Shares Outstanding (Basic)768.00M
Shares Outstanding (Diluted)768.00M

Key Highlights

  • 1AMD reported a 4% increase in net revenue to $5.5 billion in 2014, primarily driven by strong performance in the Enterprise, Embedded, and Semi-Custom segment (+51%).
  • 2The Computing and Graphics segment experienced a 16% revenue decline, impacted by challenging PC market conditions and competitive pressures.
  • 3The company is actively pursuing its strategic transformation, with 40% of 2014 revenue originating from high-growth adjacent markets, aiming for 50% by the end of 2015.
  • 4AMD has been actively managing its debt, repurchasing significant portions of its outstanding notes and issuing new debt to re-profile maturity schedules.
  • 5A goodwill impairment charge of $233 million was recorded in the fourth quarter of 2014 related to the Computing and Graphics segment.
  • 6Research and development expenses decreased year-over-year, reflecting a strategic focus on core areas and cost management.
  • 7Significant customer concentration exists, with top customers accounting for a substantial portion of net revenue, posing a risk to financial performance.

Frequently Asked Questions

AMD's revenue in 2014 was primarily driven by a significant increase in its Enterprise, Embedded and Semi-Custom segment, fueled by higher semi-custom SoC sales for gaming consoles. This was partially offset by a decline in the Computing and Graphics segment due to challenging PC market conditions.

AMD's strategic focus is on transforming its business to gain significant revenue from high-growth adjacent markets beyond its core PC market. By the end of 2014, these markets accounted for approximately 40% of revenue, with a goal to reach 50% by the end of 2015. This includes areas like embedded, professional graphics, semi-custom, dense servers, and ultra-low power client markets.

AMD highlighted several risks, including the significant dominance and aggressive practices of Intel in the microprocessor market, reliance on third-party foundries like GLOBALFOUNDRIES, potential supply chain disruptions, intense competition, and customer concentration. Financially, the company noted a substantial amount of indebtedness and the potential for cash shortfalls if revenue and cash flow generation are insufficient. Additionally, a goodwill impairment charge of $233 million for the Computing and Graphics segment was recorded.