AMD lays out a plan to get back to profit this year

AMD hopes to be profitable by the end of fiscal 2013 with the help of new products and a boost from its custom chip business

With a tough 2012 behind it, Advanced Micro Devices hopes to return to profitability this year through cost-cutting, new chips and other measures, the company's top executives said Tuesday.

The moves include releasing new chips this year for laptops and tablets and generating more revenue from its embedded and custom chip business, the executives said.

AMD ended 2012 on a sour note. On Tuesday, it reported a loss for the fourth quarter of US$473 million, including charges related to a restructuring and the reduction of purchase obligations from contract chipmaker GlobalFoundries. AMD's fourth-quarter revenue fell 32 percent year over year to US$1.16 billion.

The company has been taking steps to help it save money. It's selling its Austin campus, which it hopes will net it $150 million to $200 million, and it will continue with a previously announced lay-off plan this quarter, executives said on AMD's quarterly earnings call Tuesday. It said in December that it would lay off 15 percent of its workforce.

AMD is also cutting research and development costs and trying to save money by designing chips to standardized testing and manufacturing procedures, the executives said.

But in the short term, the going will continue to be tough for AMD.

"We expect continued choppiness in the PC market in the first half of 2013, and will closely manage the business as we reset, restructure and ultimately transform AMD," said CEO Rory Read on the call.

Chip sales started to slow in the second quarter and affected the company for the rest of the year, said CFO Devinder Kumar.

The release of new A8 and A10 quad-core chips later this year should boost AMD's core processor business, he said. The chips, code-named Richland, will deliver up to 40 percent more performance than AMD's existing "Trinity" chips, AMD says.

They'll start appearing in PCs in the first half of this year, ahead of the important back-to-school and holiday PC sales cycle in the second half.

AMD also hopes to find success in the tablet market with the launch of chips code-named Temash and Kabini, also in the first half this year. AMD showed Temash in a Windows 8 tablet at the International CES show earlier this month. Temash is targeted at tablets priced between $499 and $599. AMD has almost no presence in the tablet market today. Its latest chip, code-named Hondo, is used only in tablets from Fujitsu and Vizio.

"Our company hinges on the products we create," Read said.

AMD has strong design wins in its embedded and custom processor businesses, Read said. The company will try to expand its existing embedded chip business by moving into higher volume segments, Read said. He claimed AMD already has customer wins there but said he couldn't discuss them due to confidentiality agreements.

AMD's custom chips are used in Nintendo's Wii U gaming console, and other chips are expected to be in gaming consoles coming later this year.

AMD expects the custom and embedded businesses to constitute 20 percent of revenue by the fourth quarter, Read said, adding that the business could deliver as much as half of AMD's revenue in the coming years.

Central to the custom chip business is a new design philosophy for AMD that includes using intellectual property from other companies in chips. That philosophy is also reflected in its plan to sell ARM-based server chips in 2014.

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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