AMD has released its Q2 financial reports today, and the numbers aren't good. The company has continued to struggle as numbers have fallen short of projections. Investors aren't happy, but Microsoft might be.
CEO of AMD Lisa Su called the fiscal quarter a "disappointment", and it isn't the first time. During the last three months revenue was at a total of $942 million, a drop of 17% when compared to the already alarming Q2 2014. Gross margins were 7% short of their original estimations resulting in an increasingly worrying trend. Investors want answers.
AMD has been reliant on its deals with console manufacturers and reasonable success with Radeon GPU sales for a source of good news during the past couple years, but demand for its other hardware has fallen dramatically. It anticipates that its K12 core release in 2016 will turn things around for the better.
This ominous position makes the recent—and credible—rumor that Microsoft is looking to acquire AMD more of a plausible move than ever.
Microsoft has shown keen interest in reviving AMD's CPU operations to increase its competitiveness against Intel. In the process, Microsoft would save a fortune on Xbox One manufacturing where it currently pays AMD roughly $100/unit. It would also give it a leg up in the mobile market by increasing profit margins allowing for more aggressive pricing.
The particularly interesting result of such a move would be what would happen with PS4 manufacturing. Sony has employed an AMD CPU/GPU solution for its record-selling console, and will be reliant on it for years to come. The contractual arrangement between AMD and Sony hasn't been disclosed publicly, so it's unknown what Microsoft's options would be making the situation ripe for fascinating observation.
AMD has experienced monumental success in the past, especially when it came to its Athlon line-up (1999 to 2005). Currently, it struggles to provide the price/performance ratios that would allow it to gain market share. Its stock is dropping through the floor accordingly, and something has to change.
