Is AMD Enlisting in the ARMy?

Change is afoot at Advanced Micro Devices (NYSE: AMD  ) .

One of the interesting developments at AMD's Financial Analyst Day last week were the hints that the company may become a switch-hitter and expand beyond its traditional x86 architecture roots, which would help it step out from Intel's (Nasdaq: INTC  ) shadow.

AMD discussed the prospect of integrating third-party IP into its chips, which would make it look more like chip players such as Qualcomm, for example. That could take form in directly licensing designs from ARM Holdings (Nasdaq: ARMH  ) or MIPS Technologies (Nasdaq: MIPS  ) , or to a lesser extent incorporating bits and pieces of third-party technology.

ARM was mentioned specifically, but not in the form of any major official announcements. When asked by Wired, AMD CTO Mark Papermaster replied, "The answer is not no." Didn't he ever learn in grade school that double negatives are a grammatical no-no? On the other hand, Papermaster's response is short of a "yes," too.

The chipmaker will decidedly not be getting into the smartphone scene, since that area is already filled to the brim with ARM chips, many of which happen to be Qualcomm Snapdragons. Instead, it will be focusing on the data center market. ARM has already made a step into servers with its licensee Calxeda and Hewlett-Packard, although ARM CEO Warren East said 2014 is when ARM hopes to make a dent in the vast server market.

AMD has a solid presence in data centers, so the very possible likelihood that it will enlist in the ARMy would be a healthy win for the British chip designer. Linley Group senior microprocessor analyst Kevin Krewell thinks ARM would ask more from AMD, likely in the form of cross licensing IP. A potential deal would be particularly significant, considering that AMD explicitly said it was not pursuing an ARM license less than a year ago, so AMD signing up would be a distinct change of heart.

ARM already has a legion of backers, and it doesn't look like it's going to stop inking more licensees anytime soon.

One of ARM's licensees is one of the best ways to play the mobile revolution, which will easily become The Next Trillion-Dollar Revolution. The company is helping to power the revolution from the inside out, and also has exposure to China's explosive growth trajectory. Get access to this free report now.

Fool contributor Evan Niu has sold bullish put spreads on Qualcomm and owns shares of ARM Holdings, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Intel and Qualcomm. Motley Fool newsletter services have recommended buying shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (4)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 07, 2012, at 12:39 AM, jdwelch62 wrote:

    "AMD has a solid presence in data centers". Really, Evan? Do you know what AMD's market share of the server market is? Last I heard, Intel's was something around (over, I think) 90%. Even if that just represents x86 servers & doesn't take into account other architectures like SPARC, that doesn't leave AMD with much of a "solid presence in data centers", does it? Yes, people will make servers with ARM-based chips in them, because they can. But guess what? People have already made servers with Intel's Atom processors, & while they're selling them, they're also finding that beyond very basic web services, they just don't have the oomph needed for the heavier lifting that Xeon-based servers are so great at. So, by the time 2014 rolls around and ARM begins to ("hopefully", as you've attributed to ARMH's CEO) "make a dent" in the server market, Intel Atom chips will be at least at 22nm and consuming far less energy than current Atom models are; where, then, does that put the ARM server in the market space? Not consuming as much energy as today's servers, probably, but also not serving up the kinds of processing power that 2014 consumers will be demanding for their smartphones, tablets and, oh, yes, all those PCs and Macs that will still be out there, pounding away on the Internet.

    Dirk Meyer, recently-ousted CEO of AMD once famously said, "Real men own their own fabs"; and then AMD spun off their fabs to Global Foundries, which leaves them as what? An IP shop, like ARMH? What will partnering with ARM gain AMD on chip designs, besides a smaller slice of the overall pie?

    Well, as always, it's been fun, Evan! Fool on!... :-)

  • Report this Comment On February 07, 2012, at 6:58 AM, TEBuddy wrote:

    jdwelch should take a chill pill. AMD absolutley produces the most efficient SERVER processors, so you could take they have a pretty good position in them. And a billion dollar business is a nice foothold I would say. They are not being pushed out of that market, and will be taking share most likely this year, so foothold is there, its a fact, deal with it.

    Any BTW, the founder of AMD was the one that "famously" said that real men own fabs, not the recent promoted then ousted CEO.

    Now, as far as IP, I dont think they are talking about ARM. I think they are talking about stuff for communications or security to add to their SoC. Instead of simply buying any company they want like Intel, they could just form agreements or licenses I suppose, although the relationships are already there by which the AMD chipsets use those components.

  • Report this Comment On February 07, 2012, at 1:57 PM, jdwelch62 wrote:

    @TEBuddy: I'm not saying AMD's server processors are bad, but there's a difference between AMD having "a solid presence in data centers", as Evan wrote, and having "a foothold", as you say... I would consider a "solid presence" to be on the order of around a 20% market share, as opposed to a <10% "foothold"...

    I had been told that the "famous" qoute came from Dirk, so if I got the source wrong, my apologies. Point is, AMD sold their fabs, while Intel is in the process of building 2 new ones in the USA, one of which (in AZ) will be on the 14nm node, and will be online in 2013, if I'm not mistaken.

    And, Dude, I am so chillin'... I just like sparring with Evan; he's soooo pro-ARMH and (seems to be) soooo anti-Intel, and I just don't understand it. (BTW, my "thumbs up" CAPS call on Intel currently has a score of +4.34, and my "thumbs down" CAPS call on ARMH currently has a score of +5.78. So...)

    Fool on!... :-)

  • Report this Comment On February 07, 2012, at 4:05 PM, jdwelch62 wrote:

    BTW, I just checked an article by Fool writer Alex Planes from 1/26/2012, in which he gives the statistic that Intel hold 95.1% of the server market share.

    http://www.fool.com/investing/general/2012/01/26/why-intel-i...

    That's quite a moat, and speaks to my original point that Evan's comment that "AMD has a solid presence in data centers" is, at best, an exaggeration. That means that, if Planes' figures are correct, AMD has at most a 4.9% market share in servers, which is what I interpret when Evan says "data centers". That's not even a "foothold", to use your term; that's barely a "toehold". Granted, it hasn't always been that way, as Planes points out in his article, but since 2006 Intel has made giant strides in taking market share in servers. How, then, can you say about AMD that "they are not being pushed out of that market" if they went from "a quarter of the x86 server market as late as 2006" (Planes) to less than 5% now?

    I'd also like to know how you can make the assertion that AMD "will be taking share most likely this year"? Perhaps a percentage point or 2, but nothing significant, I'd say, based on Intel's chips being currently manufactured at the 32nm node, which AMD has had problems with last year, and Intel's 22nm Tri-Gate chips coming soon (this year). AMD is at least 2 generations behind Intel in terms of transistor fabrication, and they don't control the fabrication process. Intel's server chips, meanwhile, are getting more powerful and consuming less energy; where's the incentive for data center managers to purchase AMD servers this year?

    Lemme know...

  • Report this Comment On February 27, 2012, at 5:12 PM, marvin83 wrote:

    @jdwelch:

    Intel isn't even a chip company anymore, they're just a Holdings company that buys up all their competition and acts as would-be venture capitalists to all these start-ups out there and snatches those up too. It reminds me of Thomas Edison. Did he invent some things? Sure. But most of his stuff was invented by his lackies in different R&D departments and he just stamped his name on the patent/invention. Intel fanboys annoy the hell outta me.

    I like rooting for the underground and for the amount of money Intel forks out for R&D (highest in the world)... Keep bragging they're in the lead in technology. Well, no $hit. AMD was ahead at them at a bunch of things. Goes to show money can't buy you everything.

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