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AMD (AMD) earnings Q4 2020


Lisa Su, president and chief executive officer of Advanced Micro Devices (AMD), holds a 3rd generation Ryzen desktop processor while speaking during a keynote session at the 2019 Consumer Electronics Show (CES) in Las Vegas, Jan. 9, 2019.

David Paul Morris | Bloomberg | Getty Images

AMD stock was flat in extended trading after the company announced revenue and earnings that beat Wall Street’s already high expectations for the chipmaker.

Here’s how AMD did versus Wall Street expectations:

  • EPS: $0.52, adjusted, versus $0.47 according to Refinitiv consensus estimates
  • Revenue: $3.24 billion, versus $3.03 billion according to Refinitiv consensus estimates

AMD also provided a strong forecast for the current quarter of between $3.1 billion and $3.3 billion and said that it expects 2021 revenue would grow 37%. AMD’s revenue in 2020 was up 45% year-over-year.

The biggest highlight for AMD this quarter was its enterprise segment which was up 176% year-over-year and up 13% from last quarter to $1.28 billion. That division sells server chips as well as CPUs and graphics processors for game consoles like the Sony PS5 and Microsoft Xbox One.

AMD attributed the growth to its semi-custom sales, which is what it calls its console chip business, and said there was strong demand for the current generation of Sony and Microsoft consoles. It also said that its server revenue grew on a sequential basis.

AMD’s business selling processors and graphics chips for PCs, which it calls Computing & Graphics, also reported strong results, rising 18% year-over-year to $1.96 billion. That was driven by an increase in processor sales, AMD said.

AMD launched new processors and graphics chips last fall that have been consistently sold out. It said that its desktop CPU revenue grew on an annual basis, suggesting that its Ryzen CPUs are competing fiercely with Intel for market share.

At the start of trading on Tuesday, shares of AMD were up 85% over the past year. That’s partially because of investor enthusiasm for semiconductors, but it’s also because in the past year AMD has gained a technological edge on its primary competitor, Intel. Intel was flat in extended trading.

AMD outsources its manufacturing to partners including Taiwan’s TSMC, whereas Intel is still committed to manufacturing its best chips. That’s allowed AMD to access more advanced chip manufacturing on a so-called 5-nanometer process, which makes denser and more efficient chips.

In October, AMD announced that it planned to buy Xilinix in a deal worth $35 billion that should close by the end of this year. Xilinix focuses on specialized chips that can efficiently handle tasks like compressing videos, as compared to AMD’s general purpose processors. The acquisition is expected to give AMD more firepower to compete with Intel in the data center chip market. AMD said on Tuesday the transaction was still on track to close by the end of the year.



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Intel falls on report Microsoft will design own chips for PCs, servers


Satya Nadella, chief executive officer of Microsoft Corp., speaks during the company’s annual shareholders meeting in Bellevue, Washington, on Nov. 29, 2017.

David Ryder | Bloomberg | Getty Images

Intel dropped 6.3% on Friday following a Bloomberg report that Microsoft plans to design its own chips for its Surface PCs as well as servers.

Intel has famously had a long-running partnership with Microsoft as the primary processor maker for Windows PCs.

“Because silicon is a foundational building block for technology, we’re continuing to invest in our own capabilities in areas like design, manufacturing and tools, while also fostering and strengthening partnerships with a wide range of chip providers,” Microsoft spokesperson Frank Shaw said in a statement.

The report comes a month after Apple started selling PCs using its own M1 processor, instead of Intel chips. The Microsoft chips are reportedly based on technology from Arm, which Nvidia is in the process of acquiring from Softbank.

Apple’s chips for its iPhones and Amazon‘s server chips are also based on Arm’s instruction set, which is distinct from the x86 technology Intel primarily uses.

Earlier this month, a senior Microsoft executive did not reject the idea that Microsoft would build its own “first party” chips at a conference.

“The partnerships that we have though in this realm, from the OpenAI efforts that we have to our relationship with Intel and Arm developments that we have certainly point to the need to have advanced capabilities here, whether we build it first party or have an ecosystem of third-party partners, it’s sort of yet to be disclosed,” Judson Althoff, executive vice president of worldwide commercial business at Microsoft, said during an appearance at the UBS Global, Technology, Media and Telecommunications conference on December 8.

Windows currently runs on Arm-based PCs, usually with chips made by Qualcomm. Microsoft introduced the Surface RT tablet in 2012 that contained an Arm chip from Nvidia, although the device was discontinued in 2013. Last year it introduced the Surface Pro X containing a Qualcomm Arm chip, and it came out with an updated version of the device this year.

Microsoft said in 2017 that it was working with Arm server makers to optimize silicon for use in its own data centers.

Intel reported $9.85 billion in revenue from its group that sells PC chips in the quarter ending in September. Server chips are also a major business for Intel. In the quarter ending in September, Intel reported $5.91 billion in revenue for its Data Center Group that sells server chips.

Intel has had challenges with manufacturing its chips in recent years. Intel controls its own chip factories, called “fabs,” as compared to other chip designers, which contract with companies in Asia to manufacture chips to client specifications.

The more transistors that a chipmaker can fit into the same space, the more efficient a chip is. Currently, Intel ships chips with 10-nanometer transistors, but dedicated foundries, like TSMC, are now making 5-nanometer chips, which are technically superior.

Earlier this year, Intel CEO Bob Swan said that it was considering outsourcing its manufacturing, like what Apple does.

Representatives for Intel and Microsoft didn’t immediately return requests for comment.

—Jordan Novet contributed to this story.



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Pixel 5, OnePlus 8T, Galaxy FE


Pixel 5 and Pixel 4a 5G

Google

Apple‘s new iPhone 12 and iPhone 12 Pro are excellent phones, but some people prefer Android devices.

There are three really good Android phones that recently launched that you should know about, in case you’re looking to upgrade but don’t want the iPhone 12. They all include 5G, like the new iPhones, so you’re future-proofing yourself if you plan to hold on to your phone for the next couple of years. They also have solid cameras. And they’re all cheaper than the standard iPhone 12, which starts at $799.

Samsung Galaxy FE 5G

Samsung’s Galaxy FE was released earlier this month. It offers lots of features found in Samsung’s more expensive flagship phones, but starts at $699 instead of $999 like the Galaxy S20 phones. It’s made out of aluminum and plastic — that’s one place Samsung cut costs — but still has a high-end Qualcomm 865 processor, a sharp and colorful screen and is water resistant. And, like the iPhone 12, it’s available in a bunch of colors, such as red, blue, purple and green.

It’s also got a couple of features the iPhone 12 doesn’t have. It’s equipped with a high-refresh display, for example, which is smoother than the one on the iPhone 12 for things like scrolling through websites or Twitter. It also has a fingerprint reader under the screen, which is useful for unlocking your phone while wearing a mask (which makes facial recognition unlocking, like Apple’s FaceID, harder). I like that it has a microSD card so I can expand storage to download more movies and games.

Google Pixel 5

The Google Pixel 5 costs $699 and is a good pick if you want a phone that’s not too big and is easy to use with one hand. I really like the colorful screen, great camera and long battery life. It also feels really fast, despite a mid-range Qualcomm processor.

That’s because Google put a lot of work into optimizing the software. It has a fingerprint reader on the back — again, useful if you’re wearing a mask — and can do some of the things an iPhone 12 can, like night-mode portrait shots. I also really like the soft-touch aluminum body, which doesn’t get smudged up with fingerprints, and the unique green color Google sells.

Finally, the Pixel 5 comes with a few Google-exclusive features I love that aren’t on other Android phones. The voice recorder app automatically transcribes interviews to text, for example. It can detect if you were in a car crash and automatically dial 911. It has excellent spam call screening features, too.

OnePlus 8T

OnePlus made its name as a company selling affordable phones with flagship-level specs. Its prices had started creeping up in recent years, but the OnePlus 8T reverts to the original model, offering high-end specs in a phone that starts at only $749.

OnePlus phones are also known to be super speedy, and the OnePlus 8T keeps that promise.

It has a colorful and premium metal and glass design, like the iPhone 12. Plus it has one unique feature I really dig: It can fully charge in 39 minutes, faster than any other phone I’ve tested — the iPhone 12 charges to 50% in about a half hour. But, you don’t get wireless charging or any certified water resistance rating, two things I like to have.

Like the Galaxy FE, it has a fingerprint reader that works well and is hidden in the screen. The cameras are good enough, but I prefer the pictures from the Pixel 5 and Galaxy FE. But, you still get wide-angle, ultrawide-angle and a macro lens for lots of different types of photos, from pictures of landscapes to really close-up shots.



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iPhone price wars are back as carriers compete for 5G customers


The Apple iPhone 12 Pro Max is unveiled during a virtual product launch.

Daniel Acker | Bloomberg | Getty Images

The price Americans will pay for an iPhone 12 depends on what cell service they plan to use it with. The three U.S. carriers are actively competing for subscribers by discounting the new iPhone, which goes on sale next week, hoping to lock customers in for years on their wireless service.

It starts with a $30 discount. For people with AT&T, T-Mobile or Verizon service, an iPhone 12 costs $799 before taxes and other fees. If you want one unlocked, without activating it on a carrier, it’s $829.

Customers can get even bigger discounts for the new devices if they are willing to commit to monthly payments for the next few years, if they get unlimited data plans, and if trade their old phone in. For example, AT&T customers can get as much as $800 off an iPhone 12, nearly covering the entire cost of the device.

“That is the largest promotion we have ever seen on an iPhone launch day, topping the $650 offers by all carriers back in 2016 and topping the $700 that Verizon offered to new subscribers last year,” LightShed analysts Walter Piecyk and Joe Galone wrote this week, saying it heralded the return of the “fat subsidy.”

Verizon and T-Mobile are also offering competing promotions.

For Apple, the wave of carrier promotions could boost iPhone sales in the United States by reducing the cost of a new phone. They could also help shorten Apple’s smartphone upgrade cycle by prompting users to upgrade to a new phone sooner. Apple says the typical life-cycle of an iPhone today is three years, and the company times its new releases accordingly, putting out a fairly major redesign every three years, interspersed with more minor updates.

For carriers, iPhone promotions represents an opportunity to shore up existing subscribers and potentially gain new ones, hoping to cover the cost of the devices over multi-year payment schedules.

The new iPhones also support 5G networks, which are still under construction in the United States. Locking customers into 30-month commitments means that some users won’t be able to switch if one carrier’s network suddenly looks better than the other two.

“We believe that Verizon likely sees this as a way to move customers to higher rate plans as well as a way to make sure deployed mmWave spectrum gets utilized,” Goldman Sachs analyst Rod Hall wrote this week. “We have long expected US carriers to help to drive Apple 5G sales though we believe the economic attraction outside the US is less clear given the lack of mmWave deployment.”

Slight differences

All of the carrier promotions in the U.S. have two things in common: Customers have to trade in an old device with some value — a phone from the last few years that isn’t busted — and they have to commit to monthly payments.

But they differ in how they are targeting new customers and how the mechanics of the deals work. The best deal for any given user depends on their current carrier.

Here’s how they break down:

  • AT&T’s promotion applies both to new and existing customers. To get a free iPhone 12, AT&T requires a trade-in, and the customer must activate it on an unlimited plan that costs at least $65 per month for an individual. AT&T’s installment plan lasts 30 months. Piecyk estimates that AT&T is subsidizing new and existing customers to the tune of about $800.
  • T-Mobile is offering as much as $850 in credit on iPhone 12 models spread out over 30 payments. Users have to sign up for T-Mobile service and trade in an old device, and the amount of the discount is tied directly to the value of the trade-in. It’s also offering deals for customers who buy multiple iPhones at the same time. The best deals are reserved for new subscribers, though, with lesser discounts for existing Sprint or T-Mobile subscribers.
  • Verizon is offering a free iPhone 12 for new customers, but they have to trade in an old phone, sign onto an unlimited data plan that costs at least $80 per month for an individual, and stick with it for 24 months. Existing customers can get an iPhone 12 for $15 per month with a trade-in. Piecyk estimates that Verizon is effectively offering a $800 subsidy for new customers.

Back to the good old days

The wave of competing discounts from the three U.S. carriers is effectively a return to carrier subsidies, which was a major factor in the U.S. smartphone market in its early years.

Ten years ago, the price for a new iPhone was often listed at $199, because that’s how much the device cost when users bought it from a carrier with a two-year contract, usually with a hefty early cancellation fee. Those contracts also kept a swath of consumers on a two-year smartphone upgrade cycle.

Carriers started phasing out smartphone contracts in 2013, revealing to many consumers that the up-front price for a premium smartphone is $700 or more, and allowing them to cancel without incurring a big cost.

In the years since, carriers have effectively recreated the same customer lock-in using device payment plans — customers don’t have to pay hundreds of dollars up front for a new iPhone or Samsung Galaxy, but they must commit to paying between $30 and $50 per month for at least two years with a lump sum payment if they cancel early.

Carriers found ways to entice new customers with promotions tied to their device upgrade plans, often by overvaluing a trade-in device. But in the past two years, aggressive promotions became less common and competing carriers often did not match them.

Now, with 5G hyped as a major growth cycle for the telecommunications industry, the three carriers are working to steal customers from the their rivals or lock them in for the next two years using the 5G iPhone.

In the meantime, Apple has boosted its own device upgrade installment plans in several different ways, although it does not offer subsidies like the carriers. People with the Goldman Sachs Apple Card can buy an iPhone and pay over 24 months without paying interest.

Apple also has an upgrade program that combines an iPhone paid in monthly installments with an extended warranty, doesn’t tie users to a single carrier and allows them to upgrade to the newest iPhone after a year.

“One of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things,” Apple CEO Tim Cook said last December.



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Apple’s 5G iPhone Will Need to Be More Than 5G


Apple Inc.


AAPL 1.74%

is master of the upsell, but 5G might present the company with its biggest challenge yet.

The tech giant has scheduled an event for Oct. 13, when it is widely expected to unveil this year’s iPhone lineup. As is typical, the company has said nothing about its plans for what would be the 20th iteration of its iconic smartphone, not counting large-screen variants of the same models. But leaks and supplier reports all have confirmed that the next-generation 5G wireless standard will be included in at least some of this year’s designs, and Apple itself dubbed the event “Hi, Speed” on its announcement.

Nearly all of the company’s competitors—including the largest,

Samsung

—already have 5G phones on the market. But most of the world’s 5G action has been taking place in China, which accounted for more than three-quarters of 5G device shipments in the second quarter, according to Counterpoint Research. In the U.S., 5G coverage is still limited, even in major cities. That has hampered the uptake so far. IDC estimates that 4.2 million 5G smartphones were sold in the U.S. in the first half of this year—about 7.5% of total domestic smartphone shipments in that time.

Apple is widely expected to boost that. Counterpoint analyst Jeff Fieldhack predicts this year’s new iPhones will sharply increase the market share of 5G devices, resulting in such phones accounting for 20% of domestic smartphone sales by the end of the year. And several equity analysts have started redeploying the “supercycle” term used to predict strong iPhone cycles in the past—though not always accurately. Analysts project total iPhone unit sales will rise 10% in Apple’s current fiscal year ending next September, following two straight years of declines, according to consensus estimates from Visible Alpha.

That in turn has fueled Apple’s stock, which has jumped 59% so far this year even after retreating from its Sept. 1 peak. At more than 31 times forward earnings, the stock remains in its most expensive valuation range in more than a decade.

Is a 5G iPhone worth that? Probably not—if that is the only selling point. Past comparisons are problematic. The last major network transition to the current standard known as LTE took place in the 2010-12 time frame, when smartphones were still a fast-growing business globally. Apple’s first LTE device was the iPhone 5, which launched in late 2012. That device also sparked “supercycle” projections, though sales and the phone’s lower profit margins didn’t quite live up to the hype. Apple’s share price had surged 65% that year ahead of the iPhone 5 launch—and then slid 24% in the remainder of the year.

Smartphone buyers tend to be more motivated by improved features such as screen size, better cameras and longer battery life. The iPhone 6 cycle that kicked off in late 2014 turned out to be Apple’s best ever, thanks to the significant display-size boost that device delivered. And last year’s iPhone 11 Pro models with their triple-lens cameras turned out to be more popular than expected. Analysts believe those models accounted for 28% of Apple’s total iPhone sales volume for the fiscal year that ended in September, compared with the 23% for the previous year’s top-of-the-line iPhone models, according to Visible Alpha.

The success of last year’s iPhones is actually another challenge for this year’s, as smartphone buyers now tend to hold on to their devices for three to four years. Apple still has a strong base of fans willing to line up for whatever the company comes up with each year. Getting enough of them to justify a market value of $2 trillion will be a tall order.

Write to Dan Gallagher at [email protected]

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