A day after its competitor Intel posted financial results for its most recent quarter that came in slightly below analyst's estimates, AMD bucked that disappointing trend – but it's not quite out of the woods yet. AMD reported its second quarter results on Thursday after markets closed, and reported a loss of $0.09 per share ( …
"matched by CNNMoney."
CNNMoney is more like a low-budget hobbyist operation, I don't think even amateur individual investors take it seriously - nobody should, I think.
It's annoying that companies do this. GAAP (Generally Accepted Accounting Principles) is there for several reasons, one of which is to be consistent between companies. That way you can compare AMD to Intel, to Apple, heck even to Exxon or McDonalds.
But as ever you can make your profits look better if you just exclude some things. Restructuring costs ARE a cost. Amortisation (this is a method by which you write off an intangible asset, such as a patent, over its estimated useful economic life rather than having all the cost in one lump) is a cost. Ignoring costs will, obviously, improve the apparent position. Problem is, the costs are still there.
They say "it makes it easier to understand", but it's just not consistent, and makes it harder to understand. I assume the acquired intangibles are either from ATi or SeaMicro. Now, those will have been acquired for a reason, and I am guessing to increase sales (and a flow into profits) or to give some other benefit to the AMD (such as IP). So, AMD takes the credit for the good stuff (GAAP and non-GAAP sales are the same), but says "no, no, ignore the bad stuff".
If they are to claim there is no good stuff, then why make the acquisition? Then ALL of the value of the intangible should be written off, as it's now worthless.
It made a loss of $0.10 per share, the rest is spin.
AMD is not alone, most of these releases do some similar stunt.
on what you're looking for.
Yes, if you're looking for the current state of affairs, or to compare two different companies, GAAP is the best figure. But if you're looking for an indication of future direction of an individual organization, some GAAP costs (such as restructuring costs) can be misleading.
So as long as the companies provide both figures, and an explanation as to why they're different (as AMD did here), you're free to choose the one that best fits the questions you're asking.
Re: It depends...
I see your point, but there are three issues:
1) it's not transparent, because they have not given us all of "both figures". They have not disclosed the "good news" that came with the acquisition, just the bad. Any income/cost reduction from the amortised assets should be excluded in the non-GAAP too, and it's not. Hence I am still not comparing like with like. Why not have a whole column headed "acquisitions in the period" and strip it all out.
2) They have still incurred the restructuring costs, so they should ell me those and why they believe they will reduce costs in the future, by how much. Why should restructuring costs be excluded anyway? It's a cost this quarter for savings in the future. It can't be amortised as it's not an asset, so it should be put in. By all means tell me "we spent $xmillion restructuring" but don't present it as a non-cost. Will, next quarter they be excluding the cost savings from the restructuring to allow me to see how it went - no, they won't, so again I am not comparing like with like.
3) As a result of the spurious presentation method the press release and this article focused on the non-GAAP figure, purely because AMD's spin meisters want to keep attention on something they can show off to be good. It's funny how all non-GAAP disclosures make the world seem a better place for the company doing it, isn't it?
I sound a lot more worked up than I really am about this, as I'm not even an investor in AMD!
They should increase prices.
I'm no fanboy, but I've bought £300 of AMD products in the last 12 months and if the same products had been priced at £400, they would still have been the best option. Many of their products more than hold their own against Nvidia/Intel and yet AMD are often significantly cheaper.
No wonder the company is worth so little when they needlessly make a loss on their sales - the market cap of the whole company is just £2 Billion - almost half the value of a company such as Sports Direct!
AMD is doing better
no matter if you use GAAP or non-GAAP, AMD is doing better in a very dismal economic environment worldwide. The one penny diff between GAAP and non-GAAP is meanless. What is important is that AMD's console contracts account for approx. 5 Million custom APUs over the next few years. It also sends a clear message that AMD's APUs are superior and the future as they are literally changing the PC landscape for the better and forever. Discrete CPU/GPU components will be a very limited market segment going forward in all market segments as APUs are superior in price, performance and energy consumption.
Re: AMD is doing better
I personally think It's likely to be quite a lot more than 5M APUs. The Xbox 360 and PS3 both sold around 75 million consoles over the 7 (or so) years since their release. Over the next 7 years I expect AMD will sell more than 150M custom APUs between the XBOne and PS4. That doesn't take into account the APU in the Wii-U, or the standard PC APU's they're making that are likely to find their way into notebooks and tablets. I even have one of their APU's in one of my desktop machines.
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