Remember SeaMicro? Red-ink-soaked AMD dumps it overboard

Tattered AMD says it's done with its SeaMicro server division, following a grim quarter that saw the ailing chipmaker weather losses beyond the expectations of even the gloomiest of Wall Street analysts.

In guidance issued alongside AMD's earnings report for the first quarter of its fiscal 2015, CFO Devinder Kumar said the company was "exiting the dense server business, formerly SeaMicro, effective immediately."

In a conference call with financial analysts on Thursday, AMD CEO Lisa Su said the company will retain SeaMicro's fabric technology as part of its overall portfolio, but it was unclear whether it plans to seek a buyer for any other parts of the business.

SeaMicro, which AMD bought for $334m in 2012, was an upstart hardware maker that focused on building ultra-dense server racks, initially with Intel Atom processors and later with AMD's own Opteron. For a while, it looked as though AMD was going to use SuperMicro as the base from which to launch its "Seattle" 64-bit ARM server chips, but it seems Su has decided she has bigger fish to fry.

Right now, those fish are looking raw and bloody. There was red all over AMD's earnings report for the three months ending on March 29. Total revenue for the quarter was $1.03bn, a 26.3 per cent year-on-year decline.

As was the case last quarter, the Computing and Graphics division, which manufactures chips for PCs and mobile devices, was hardest hit. This time around its sales were just $532m, down 38.2 per cent from the year-ago period. The Enterprise, Embedded, and Semi-Custom division, on the other hand, saw revenue of $498m, which was a drop just a 7.1 per cent.

But to say the Enterprise division didn't do that poorly in the quarter is to damn AMD with faint praise. Once again, Enterprise was the only segment of the comany that recognized any operating income at all. This time, though, its operating income was $45m, which was down 47.1 per cent from last year's quarter.

The Computing and Graphics division's $75m operating loss, on the other hand, represented a stomach-churning 2,600 per cent decline from the $3m in operating income it managed to scrape together in the year-ago quarter. Even compared to the previous sequential quarter, the division's operating losses deepened by 33.9 per cent.

Given such brutal results, it should be no surprise that AMD posted another net loss for the quarter. But at $180m, this quarter's net loss was 800 per cent worse than the $20m AMD lost in the year-ago quarter. And even disregarding taxation, amortization, interest, and other accounting items, the chipmaker still lost $75m.

In terms of earnings, it spelled a loss of $0.09 per diluted share, which was four cents worse than the average of the Wall Street bean-counters' estimates.

And if that wasn't worrying enough, Kumar said AMD projects that its revenue in the second quarter will be flat compared to this one.

Needless to say, investors weren't pleased. AMD's share price started sinking almost immediately in after-hours trading following the report, and at press time was down more than 9 per cent. ®