AMD reports profit in Q3 after reducing its reliance on PCs

AMD's revenue driven by custom chips for products like Xbox One and PlayStation 4

Reduced reliance on the PC market helped Advanced Micro Devices turn a profit in the third quarter, with the company looking for faster growth in the coming quarters.

The company reported net income of US$48 million for the third quarter ending on Sept. 28, which is an improvement from the loss of $157 million reported in the same quarter last year.

Revenue for the quarter was $1.46 billion, an improvement from revenue of $1.27 billion a year ago. Analysts polled by Thomson Reuters estimated sales of $1.42 billion for the most recent quarter.

Revenue growth was driven by the company's semi-custom chip business unit, which was established earlier this year to make chips for gaming consoles, embedded devices and other non-PC products. AMD's chips will be used in Microsoft's Xbox One and Sony's PlayStation 4, which will ship later this year.

Semi-custom chip business revenue grew by over 26 percent compared to the second quarter of 2013. That business will account for about 50 percent of revenue "from high-growth markets over the next two years," AMD CEO Rory Read said in a statement.

As semi-custom revenue flourished, PC revenue declined. Revenue for the Computing Solutions unit, which deals in PC chips, was $790 million, declining 15 percent year-over-year. The company also recorded growth in revenue from graphics chips.

AMD earlier this year projected it would record a profit in the third quarter. The company "continued to successfully execute the strategic transformation plan we outlined a year ago," Read said.

AMD has been going through years of restructuring under a new management team led by Read. The company laid off 15 percent of its workforce last October, and cut costs by trimming its chip offerings and selling assets. It also forged relationships with more chip manufacturers to cut production overhead.

The company is now expecting a larger chunk of its future revenue to be from its custom chip business as the PC market fades away. AMD has a negligible presence in the tablet market and does not make products for smartphones.

AMD has also been trying to shed its image as an Intel clone. The company licensed the ARM architecture, which it will use in server chips due for shipment to server makers early next year. The company will make processors based on ARM designs for embedded devices as well.

However, the company has not lost sight of the PC market, which remains its bread-and-butter business. Around midyear, AMD started shipping the latest PC chips code-named Kabini, which had a strong ramp up and is selling well, said Dean McCarron, principal analyst at Mercury Research.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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