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Does AMD Have a Shot in Tablets?

Advanced Micro Devices (NASDAQ: AMD  ) used to be a chip superstar. The story was compelling: It was a no-name second source to Intel (NASDAQ: INTC  ) that had risen to become the last man standing in the fight for the PC and x86-server chip markets. From 2003 to 2006, AMD had a pretty clear technology lead over Intel as its more efficient micro-architectures left Intel's GHz-happy strategy in the dust. AMD won big time, and its shareholders were amply rewarded. However, the story went south beginning in 2006 as Intel caught up and eventually left AMD in the dust.

The tablet situation
While AMD had been in a pretty rough competitive spot in both the PC and server markets over the last several years, the form-factor shift from PCs to tablets just made the situation worse. AMD's PC presence has been mainly in the low end, where it has majority share, even against Intel. That is the most susceptible to cannibalization by low-end tablets. As PCs declined, AMD not only saw its addressable market shrink, but it saw a desperate Intel start to focus on share gains at the low end to save its revenue stream.

As the reality sets in that the tablet form factor will be the most ubiquitous instantiation of the PC, both Intel and AMD will see their client businesses meaningfully shaped by their ability to produce class-leading products for these form factors. With the launch of Intel's Bay Trail product lineup for tablets, there's little question that Intel will be viable here, especially as the company has committed to shipping more than 40 million tablet units next year. But there still remains plenty of doubt over AMD's ability to compete here.

The roadmap gets better, but it still doesn't look competitive
When AMD was hyping its Temash system-on-chip last year, AMD tried to make it look as though it would be able to go head-to-head with low-power Intel and ARM (NASDAQ: ARMH  ) -based tablets. Tablets with this Temash part are exceptionally rare, precisely because it is unsuitable for this market. The higher-performance, quad-core parts are too power-hungry for iPad-like tablets. The lower-performance, dual-core parts don't have the performance of a modern Intel/Qualcomm/NVIDIA chip. It's the worst of both worlds.

Next year, AMD promises to do better with its 28-nanometer Beema and Mullins products targeted at Windows 8.1 devices. But there's nothing to suggest that they'll be competitive with Intel's current-generation Bay Trail products, let alone next year's Cherry Trail 14-nanometer with completely redesigned graphics. Let's also not forget that Intel is willing to price its tablet chips aggressively and provide significant NRE help to give tablet vendors more incentive to use its chips. Can AMD really go up against that, particularly with what is likely to be a lower-performing and/or higher-power product?

Foolish bottom line
Next year will be rough for AMD in the low end of the PC market, as Intel pushes aggressively into that space. On top of that, it's tough to see AMD offering any meaningful competition in the Windows 8.1 tablet space from a product perspective, let alone from the OEM perspective.

While AMD's future could be bright and prosperous outside the PC and tablet markets, and while the company could pull an ace from from its sleeve, investing in hope is much riskier than investing in facts. The facts today point to AMD stretching itself too thin and attempting to take on too many projects, all while it tries to cut operating expenses and manage costs in a deeply cutthroat environment. This is not a recipe for success -- quite the opposite, in fact.

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Read/Post Comments (14) | Recommend This Article (3)

Comments from our Foolish Readers

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 December 26, 2013, at 1:46 PM, bronxtrader wrote:

    Ashraf Eassa , you clam so much of Intel, Have you seriously seen what is going on with AMD, they will be firing on all cylinders, server, desktop, tablet, console, embedded. This company is awakening to a giant once again. We shall see $60 plus next few years if not by Jan 2015. When they announce the Seamicro wins along with embedded wins, HSA and they rest is going to make it an excellent 2014 for AMD,

  • Report this Comment On December 26, 2013, at 1:50 PM, KenLuskin wrote:

    Continuing to focus on the WRONG area when analyzing any company is stupid, continuing to do so over, and over again, is a sign of INSANITY.

    Did it hurt AMD in 2013, that Temash did NOT win may designs?


    Will it hurt AMD in 2014 if Mullins does NOT win many designs?



    Because AMD has said they are NOT emphasizing competing in low or NO margin areas, such as tablets.

    How is Nividia going to do in tablets in 2014?

    NOW, that is a relevant question, because they are emphasizing and investing heavily in the mobile area.

    AMD will continue to drive their technology forward in small form factors, but that is NOT their emphasis.

    Your focus on the little tail of the elephant is NOT a way to understand the SIZE, STRENGTH, and POWER of this beast.

    Your Disingenuous analysis of AMD is becoming legendary... and is a sign of your INSANITY!

    AMD is emphasizing GRAPHICS , and DENSE SERVERS.

    AMD has superior IP in these areas!

  • Report this Comment On December 26, 2013, at 2:27 PM, bronxtrader wrote:

    They are not giving up on anything.. Kevari is going to challenge the desk/laptop space for sure.. They are winning in all areas.. just a matter of time when they announce all the wins. This stock is destined for the greatest return story...

  • Report this Comment On December 26, 2013, at 3:08 PM, StockMaster wrote:

    You fail in your analysis just like many of the others. You are examining under the old thesis of computers and the technology around it. AMD makes the processors for the PS4, Xbox1, and the Nintendo WiiU. They have contracts with the government, are working on new server processors, and also have dual video cards in the new and sold out Mac Pro. They have positioned themselves for a huge upswing on their earnings report coming, and at least for the next two years thereafter. Going forward after that, with the new capital generated, it is my belief they may take other major chip makers out and chip a lot away from Intel. Let's not forget they make a top video card that is completely sold out. Your assessment is completely wrong, and you are obviously biased to hold the status quo of Intel's empire.

  • Report this Comment On December 26, 2013, at 3:32 PM, KenLuskin wrote:

    The author sold his shares in AMD in the low 3s...

    Nuff said!!!

    There should be some disclaimer for people like this guy.. don't you think MOTLEY FOOL?

  • Report this Comment On December 26, 2013, at 5:00 PM, FioeBilo wrote:

    This author was claiming anything below 7 a share on AMD is a gift June 25 2012 - fundamentals have dramatically improved since then and now he is overwhelmingly bearish - sounds like manipulation of the stock- every time AMD rallies he blasts it - credibility- perhaps he understands the tech but not the market

    " Thanks for the comment! I added more today -- anything below $7 is a gift.

    25 Jun 2012, 01:35 PM" ... Ashraf Eassa

  • Report this Comment On December 26, 2013, at 6:05 PM, Snickersnee wrote:

    Ashraf has zero credibility. He is literally one of the most disingenuous people on either Seeking Alpha or Motely Fool.

    Listening to him truly makes you a fool.

  • Report this Comment On December 26, 2013, at 7:55 PM, GarySchuster wrote:

    The title of the article was "Does AMD have a shot in Tablets?". The article was not a general review of AMD's products/prospects but rather a brief summary/assessment of AMD's product offerings for use in tablets. I think the information provided was accurate and that the author (Eshraf Eassa) gives a clear and well justified opinion of what is likely to occur.

  • Report this Comment On December 26, 2013, at 10:13 PM, smallormidcapman wrote:

    So let me get this straight. The "author" who was long AMD but sold his shares in the low $3's...has now been taking the other side of the trade as he bashes AMD over...and over...and over? Further, he focuses on the segment of the business they are LEAST interested in and refuses to discuss the high margin growth segments they are concentrating on? Lastly, he is complimentary of both Intel and/or Nvidia in regards to AMD?

    Thank you Motley FOOL!!! I know my 25,000 long position is safe and sound...

  • Report this Comment On December 26, 2013, at 10:16 PM, smallormidcapman wrote:

    Hey Gary, do you know a Beema from a Mullins from a Kabini? Do you know that AMD will release ARM products into this space in 2015?

    If not, then you are as clueless as the "author".

  • Report this Comment On December 26, 2013, at 11:31 PM, masterwallstreet wrote:

    In my opinion only, I find your article to be full of BS. Anyone with common sense can see the writing on the wall. This company has never been so hot in this company's history. They are in Playstation 4, completely sold out and backordered. It will produce revenues in this quarter and beyond. They are in X Box 1, completely sold out and backordered. It will produce revenues in this quarter and beyond. They are in Apple MacPro. MacPro is completely sold out and backordered. Their graphic card is selling and is so hot that they can not keep them on the shelf. You have the ARM 64 bit server. It will make its debut in 2014. Right now in my opinion they will have a blowout in the fourth quarter and you will look pretty stupid. You should short Intel and long AMD in my opinion only. Intel brand is starting to die out and the stock is overpriced and overvalued. AMD is underpriced and undervalued. AMD will take a lot of customers away from Intel. Everybody wants the AMD brand now. Short Intel. Long AMD. That is where the market value is.

  • Report this Comment On December 27, 2013, at 9:09 AM, kjurden wrote:

    @Ashraf Eassa...Well, I see I'm not the only one who disagrees with your assessment and your incessant bashing of AMD! But why would anyone expect anything different from someone as young as you, who doesn't really have any real experience in investing....other than helping to create a couple of games, I can't even see that you have enough experience in the tech industry to comment on it, let alone advise investors.

    I can see, you're a big fanboy of INTC & NVDA, but for what purpose is unclear.

  • Report this Comment On December 27, 2013, at 12:08 PM, kjurden wrote:

    Just for the records...AMD APU's are in tablets already...

    [Eassa.."With the launch of Intel's Bay Trail product lineup for tablets, there's little question that Intel will be viable here, especially as the company has committed to shipping more than 40 million tablet units next year".]

    What a load of crap...this author is about the only one who thinks that Bay Trail doesn't suck.

    INTC is losing MARKET SHARE to AMD...Wait and see the new line up of AMD products that will be announced at CES 2014 on January the 6th!

  • Report this Comment On December 28, 2013, at 12:20 AM, pwang99 wrote:

    This author has no idea about what he is talking!!!

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