AMD's (NYSE: AMD) earnings last week showed the company continues to do what it does best: lose money. And while I jest -- minus some charges, it showed decent profitability last quarter -- one of the more troubling areas of its recent earnings was its graphics card segment. With AMD having stolen chunks of market share in previous years, does its inability to profit from any of these sales validate NVIDIA's (Nasdaq: NVDA) strategy of focusing on the high end of the market?

Wh-wh-what happened?
AMD's woes in squeezing earnings out of its graphics card unit aren't new. In the summer, I took AMD to task for its failure to secure more profits from its position in the graphics market:

"It's no secret in the graphics card community that [AMD] has been wiping the floor with NVIDIA in some key segments of the market. Yet the company saw operating profits in the segment fall from $47 million last quarter to just $33 million in the current quarter. AMD blamed a higher mix of less-profitable notebook cards and parts shortages for declining profitability, but I'd like to see better results when the company is at such a strong competitive standpoint in midrange cards."

Well, if I wasn't impressed with $33 million, you better believe I think last quarter's $1 million operating profit on $392 million in sales is a fly in the company's ointment. AMD might be dominating areas like graphics cards in notebooks, but what good are these gains if they're too aggressively priced to meaningfully add to the bottom line?

Why market share might not matter
When looking at graphics cards' market share, you have to remember: It's hard to make money on cheap graphics cards. That's why market share -- which is measured in units -- matters less, and investors should focus on what price points companies dominate. One of the stronger aspects of NVIDIA has been its stranglehold on the gaming "enthusiasts" and professional segments. These segments have lower volumes but come with great margins and selling prices.

Concerns built recently around NVIDIA's waning share, but judging by AMD's recent results, it hasn't been too successful in stealing customers in profitable segments of the graphics market. NVIDIA recently let its lower-end segments languish while it rolled out its new Fermi architecture across its high-end cards and focused on other growth initiatives. However, the company has managed to push new technologies across its product line, re-entering the mid-market "sweet spot" of cards priced around $200.

Good news or bad news for team green?
AMD's bottom-line failings bring about an interesting question for NVIDIA shareholders, is this good news or bad news? On one hand, it shows NVIDIA's strategy of ceding the low end hasn't cost the company much in the way of profits.

On the other hand, it also shows continuing weakness in the PC market. While tablets and mobile phones probably won't cannibalize demand for high-end systems as much as cheaper netbooks and tablets, there's no doubt that NVIDIA, AMD, and Intel (Nasdaq: INTC) all stand to be losers of the thematic shift of consumers moving their spending dollars to both mobile devices and tablets.

Looking past graphics cards
In the end, I think investors in both NVIDIA and AMD need to be looking past consumer graphics to assure that their investment dollars can weather the tablet and smartphone shift. For AMD, that means share gains in notebooks and low-end graphics cards might not be as meaningful as it was believed a year ago. The long-term growth driver will still be whether its new Fusion platform is a hit.

For NVIDIA investors, the shift to parallel processing on high-end systems is a trend that can decrease its reliance on consumer graphics cards. Finally, while its Tegra mobile processors have been outclassed by Qualcomm (Nasdaq: QCOM) and Texas Instruments (NYSE: TXN) in smartphones thus far, if Android tablets gain traction it's a much more competitive offering.

So the good news for NVIDIA: AMD's not seeing outsized profits from its share gains. The bad news: The PC market keeps looking worse.

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