AMD (AMD) Earnings Analyst Roundup

After the close, AMD (NYSE: AMD) reported 3Q15 Rev/EPS at $1.1B/($0.19), with a better topline versus consensus of $996M/($0.12). PC computing was up 12% q/q (for the first time in two years) and semi-custom (which includes gaming processors into Xbox and PS4) grew 13% q/q. AMD guided DecQ down 10% q/q. AMD guided revenue down 10% q/q and GM inline at 30%, well below the consensus of flat q/q.

AMD also announced a joint venture with Nantong Fujitsu Microelectronics (NFME), an outsourced semiconductor assembly and test provider, that combines AMD's assembly, test and packaging facilities with that of NFME. NFME will take an 85% ownership interest in the JV. AMD will receive much-needed cash with net proceeds of $320 mln, net of taxes. The transaction is expected to close in 1H16.

Mizuho Securities analyst Vijay Rakesh thinks continued strength in Embedded and Semi-custom will be key for AMD. There are some new ramps expected in 2H16, as well as surviving continued PC weakness. He expects continued headwinds in Computing and Graphics which represent 40% of revenue. He maintained the Neutral rating and PT of $2.

Chris Caso of Susquehanna summed up the story pretty succinctly: The highlight of the call is that AMD has negotiated a deal to put their back-end manufacturing assets into a JV, which should raise about $320 mln in cash. Unfortunately, that is about equal to the amount of cash that AMD burned through this year. The core issue for AMD is that their debt burden is simply too high given the market realities they are facing. No change to the Neutral rating or $2 PT.

Christopher Rolland of FBR cites the shift in business plan: Advanced Micro Devices has wisely directed its strategic focus away from the core PC market and toward gaming APUs, microservers, and custom-embedded processors, areas on which its larger competitor is less focused. However, we now believe much of this transition has already played out, with visibility into meaningful peak earnings elusive. No change to Market Perform rating and $2.50 PT.

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