- AMD's recent quarterly results "were not that bad."
- AMD's forecast for the current quarter is "too low" and the rollout of Windows 10 will benefit the company.
- AMD's recently launched Fury X graphics processor is an "unexpected success."
With respect to Lau, I don't find these arguments terribly convincing. Here's why.
Yes, AMD's results were quite bad
Lau argues that AMD's second-quarter revenue of $942 million (a steep 34.6% drop from the same period last year) and non-GAAP loss of $0.17 per share (versus a $0.05-per-share non-GAAP profit in the year ago period) weren't "that bad."
Given AMD's relatively precarious financial situation, a sharp year-over-year decline in sales and swinging from a modest non-GAAP profit to a relatively wide non-GAAP loss are "bad" in my book.
Lau also says AMD didn't "miss expectations by much." That's technically true, but it's meaningless in light of AMD's downward revision on its second-quarter outlook a little over a week before the full earnings release.
Did AMD sandbag results?
In addition to AMD's less-than-stellar results in its second quarter, the company forecasts "just" a 6% increase in sales for the third quarter, which at the time of issuance yet again missed the analyst consensus. Lau argues that AMD is "sandbagging" this revenue number and that system vendors will build "inventory for AMD chips to address strong hardware demand stemming from the Windows 10 upgrade," noting that "AMD's revenue from this segment should increase."
However, I see no evidence that AMD is sandbagging its guidance here. In fact, on the earnings call, CEO Lisa Su said the company expects its shipments of laptop-oriented processors to "rebound and ramp in the second half of the year as more than 35 Carrizo [AMD's next-generation chip] platforms come to market globally."
It looks as though AMD's outlook already assumes that shipments of laptop chip sales will pick up in the second half of the year. If anything, AMD's track record of having to guide-down (which it did just last quarter) suggests that the company has a habit of overestimating demand for its microprocessors.
Fury X GPU an "unexpected success"? Hardly.
Lastly, Lau argues that AMD's Fury line of GPUs "is a second reason investors should buy AMD." He says these GPUs are "earning high scores" in third-party reviews and even states that demand for the R9 Fury X "was so strong, with supply so limited, that the card was reportedly out of stock."
There is little argument that AMD's Fury line of graphics processors is in short supply, but this doesn't necessarily indicate abnormally strong demand. In fact, there have been rumblings that AMD's supply of its Fury and Fury X GPUs is so tight that not all of AMD's traditional add-in board partners were able to launch Fury-based cards.
In other words, it seems that AMD, for whatever reason, is facing a significant supply shortage.
To make matters worse, AMD's chief competitor, NVIDIA (NASDAQ:NVDA), appears to be having little issue getting supply of its GeForce GTX 980 and 980 Ti graphics processors to its add-in board partners. Further, given that various review sites show that the 980 Ti is the same price as the Radeon R9 Fury X but is more power-efficient and faster, being supply limited at this point is a clear negative for AMD.
The Radeon Fury is known to be a little bit faster than a standard GTX 980 (and also more expensive, if one can find them in stock), but the market is seemingly filled to the brim with factory-overclocked 980s that should narrow the performance delta between the Fury and the standard 980.
In other words, being "out of stock" when your competitor has plenty of very competitive product on the market seems to me more of a negative than a positive.