AMD Answers a Key Question

Advanced Micro Devices (NYSE: AMD  ) is a stock that often elicits a wide range of emotions from investors. On one hand, you've got the bulls who believe that the company will rise out of its funk on a number of drivers (consoles, ARM servers, etc.) and blast its way to obscene profitability. On the other, you have the bears who think that AMD is on the fast track to bankruptcy and that all of its efforts will prove futile. While the purpose here isn't to make a grand prognostication either way, it is worth exploring how AMD's Chief Sales Officer thinks the company can compete going forward.

How does AMD deal with Intel?
AMD has made it clear that it wants to continue competing in the PC business but that long-term it wants to diversify its revenue base so that about half of its revenues come from non­-PC endeavors such as dense servers, semi-custom, embedded, and so on. This is certainly the right thing for AMD to pursue, particularly as the PC market isn't really growing (and AMD's competitive position within the PC market is not great), but obviously these products still comprise the bulk of AMD's revenue base.

At Intel's (NASDAQ: INTC  ) investor meeting, it admitted that it had pretty much exited the value portion of the PC market (where AMD has dominant share) but that it would be working feverishly to win back share there with its low-cost, low-power Atom based processors. When the BMO analyst asked about how AMD would deal with this, Mr. Byrne made the following arguments:

  • AMD's Kabini and Temash (low-power, low-cost chips) were first to the market and have better graphics performance than Intel's low-power Bay Trail chips (based on the low-power Atom core)
  • AMD is going to try to gain back share in the higher end of the PC market with its upcoming Kaveri chip which
  • AMD's next generation low power chips – Beema and Mullins – for low-cost PCs and fanless Windows 8.1 tablets, respectively, should also help to hold back the assault from Intel's own low-power chips

These are interesting points, but these points can be pretty easily countered by the following bearish arguments,

  • AMD may have been first to market, but the market is flooded with Intel-powered Windows 8.1 tablets at all screen sizes – AMD's only real tablet wins with its tablet-oriented Temash have been some pretty bulky, low-quality convertible PCs. Intel has also cited 140 design wins in low cost PCs – and those designs probably came at the expense of AMD.
  • AMD's higher-end PC chips have been entirely uncompetitive and none of the data that AMD gave about this next-generation chip will remedy the deficiencies of its predecessors (it will have better graphics performance than the Intel chips it's going up against, but likely worse power and substantially worse CPU performance).
  • The last point is interesting, but Intel is aggressively winning designs today and by the time AMD comes in with its 2014 parts (which will probably go up against Intel's next generation 14 nanometer parts), there is no evidence to suggest that AMD's chips will be competitive on performance per watt or, given Intel's aggressive pricing, performance per watt per dollar.

Foolish bottom line
AMD has always been good about making promises. Its current generation Kabini and Temash were promised to take the world by storm, only to see a moderate uptick in sales in Q2 before the company resumed its market share decline in Q3. The big fear at this point is that AMD's PC chip business will become collateral damage in Intel's battle with the top ARM vendors since Intel is focusing on the low cost/low power space more feverishly than ever before. It's not going to be easy, that's for sure.

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  • Report this Comment On December 19, 2013, at 1:41 PM, KenLuskin wrote:

    More BS from the TOP BS artist writing for Motley Fool.

    The author completely MISSES the point made by the VP about everything AMD doing in the PC area relates to GRAPHICS.

    AMD Graphics are FAR superior to Intel's!!

    Everyone knows this!

    This is EXACTLY what AMD is doing.

    ALL of AMD's PC products are based on SUPERIOR graphics.

    How can the author be so intellectually DISHONEST?

    Or is that he is just plain DENSE???

    Maybe its BOTH?

  • Report this Comment On December 19, 2013, at 4:04 PM, mycardbrokedown wrote:

    Liar - Liar! Ashraf - Liar!!

    @Ken

    No this guy is not dense... he's obviously payed by some intel interest, either to pump intel in an event of sudden crash (which will come soon apparently from all the hot air around intel and rabid media "coverage" of intels many achievements that amount to 0...) or he needs to punch amd so that shares drop so he or others he serves can buy cheap..

    To the authors writing:

    - There is nothing in desktops up until 300$ that's intel and worth buying, and most businesses and private DYI'ers are already sensing/buying into it... You need to be stupid to the brim of retard to think anything intel lower then high i7' and x lines are worth the money.i3 ->i5 are essentially worthless if you compare performance/$ and at times the difference is so big at some pricepoints you for same performance you pay half with AMD... For instance I had to buy nearly 100 systems for my business... If I went intel I would have paid almost double because of the need of separate low end GPU's and because i5's are ridiculously overpriced... so I went all amd and to my surprise I even got mb's that may be upgraded to kaveri - so I'm really happy... for the rest of the money I bought some intel servers (isn't it ironic? AMD actually freeing up money for intel)

    Intel is worth buying from 300$ up and for anything mobile/fanless mobile... NOTHING else.

    If you're a regular Joe wanting a computer to work on or need computers for your business AMD is a nobrainer buy.

    If you want portable devices, laptops, servers or high power workstations - intel all the way.

    If you want tablets, phablets, phones, wearables - any ARM will do...

    - On the other hand this guy says that the decline of AMD market share... please do provide DATA you... Because just a week ago I've seen analysis done by multiple companies(just hit it up in google - that research device you never use because you get all your subjects from intel & nvidia PR/Marketing ) showing clearly that:

    a) AMD market share has risen in the desktop PC area (guess who's market share has slipped??)

    b) AMD laptop market share has risen 15%

    c) Channels are already crying out AMD GPUs depletion (caused by litecoin craze)

    This analysis was so dangerous that intel actually made a statement to say that it sees PC market gaining traction again. True AMD and others stated that too, so there it goes...

    So this guy just misinforms everybody ready to swallow up his regurgitated internal memos for whoever he works for...

    Dear ashraf: Where do you get your info from that Intel will actually launch any 14nm in 2014?? Cause last I've seen first 14nm will come out 14Q4 - 15H1, and on top of that it will be mobile only.

    Just a few days oppenheimer decided to downgrade AMD? Why ? well because they are the biggest institutional stock holders and want to streghten their positions...

    What is it Ashraf, your sugar-daddy needs to buy cheap AMD stock? And get rid of your intel stock at high price? Well guess what... I hope intel shares drop to 15$ next year before you and all your accomplices/bosses get to sell them.

    This article belongs in a section like "opinions" as it's his uneducated opinion about things he obviously doesn't understand... or in a special area of fool.com named "Intel" or "Intel fanmail"

    but wait... what do I see fool.com & Ashraf have Intel stock... WOW... what did you do, sell all of your AMD stock @ 3.72 didn't you? You also lied about having long position with AMD on Seeking Alpha ... I have news for you little monkey... amd is not going anywhere... not in the near future... wanna bet q4 is even better then q3 and that AMD will have 100M net?

    Market speculation is the prime reason why everybody hates Wall str. Instead of making good business better it just banks on loss, and you mr Ashraf are a tool int this scheme... I bet you're very proud of you service to your master-beast :)

  • Report this Comment On December 19, 2013, at 7:20 PM, xnicholas wrote:

    1. I read the comments about the author being biased. I was hesitant to believe it, because I've seen multiple articles on AMD, and there is only one author who is ever COMPLETELY BIASED against AMD.. and that man is on another website....

    Ashraf Eassa from seekingalpha.. (the same author of this article) ( make no mistake, Mr. Eassa could be right about AMD, but notice how he makes no price predictions or any concrete predictions of any sort) (and btw a broken clock is right twice a day)

    2. I cannot believe in December 19, 2013m when AMD's highest and most profitable GPU are being SOLD OUT due to litecoin mining, that this isn't mentioned once in the article... ( i believe that similar niche markets will help amd gain advantage in he future)

    3. I have more money than my car is worth in amd stock. I believe it will double to a price of 7 dollars by dec 2014

  • Report this Comment On December 19, 2013, at 7:38 PM, TEBuddy wrote:

    He also has no facts about Atoms being a better value or better performance. He will probably offer some dribble how Intel's cheap chip only draws 10W while AMD's draws 15W. And we will all say who cares? Or the Atom only draws 15W compared to 25W on AMD. And again who cares. People do not buy value notebooks for exceptional battery life. People don't build desktops or HTPCs and bat an eye at 25W.

    Meanwhile AMD will offer more performance than the cheap Intel chips.

  • Report this Comment On December 19, 2013, at 8:01 PM, jimbeama wrote:

    Second time today that I've seen comments claiming Intel 14nm production will be 2015. That is not true.

    http://tinyurl.com/o5pw8nf

    quote from the article

    "Intel was supposed to start shipping Broadwell chips to OEMs in Q4 2013 (this quarter) giving them time to integrate the chip into their new notebooks, laptops, desktops, and tablets. Instead the new chips will start shipping in Q1 2014."

    When you get all high and mighty about how someone else is not being factual or supporting their statements that you do not *want* to believe you should first fact check your own self. Otherwise you lose all credibility and your time writing was wasted other than providing some laughs for people.

  • Report this Comment On December 19, 2013, at 9:11 PM, bluesky64 wrote:

    All boat will rise but AMD will double and INTC will not.

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