AMD Lost Market Share Last Quarter

It wasn't too long ago that the Fool article, "AMD Probably Lost Market Share in Q4" hit the feeds. The premise was rather simple. The PC market was down overall in the fourth quarter. And since AMD's (NYSE: AMD  ) competitor Intel (NASDAQ: INTC  ) reported that its PC revenues were flat on a year-over-year comparison during the quarter, the difference must have come out of AMD's revenue.

When AMD reported its earnings on Jan. 21, the results served to confirm this. AMD lost PC market share in the quarter, and it is set to lose share in first quarter of 2014 and likely the rest of the year.

Intel isn't kidding
When Intel's Kirk Skaugen, GM of the company's PC Client Group, presented at the Credit Suisse Technology Conference, the message was clear: Intel, which had ignored the low end of the PC market for many years, was finally serious about taking back share in this segment. Up until now, Intel hasn't had a low-cost, low-power part with which to successfully do battle with AMD's low-power products. But thanks to its tablet efforts with Bay Trail and its successors, Intel can finally profitably play in the low-end PC market.

This is devastating for AMD, since it has been largely driven out of the high end of the PC market and has been relegated to the low end and mid-range of the consumer market. While Intel is a pretty aggressive player in the mid-range, Skaugen noted that Intel had less than half of the sub-$399 PC market. While some may view this is as a victory for AMD, the reality is that Intel had not really focused on this market until now. With a product line specifically targeted for these low-cost, low-power systems, AMD is set to lose some pretty serious share.

Consoles and ARM servers -- the talking points
While the AMD management team likes to downplay the PC market, they do like to build pretty large expectations for their semi-custom/embedded businesses, as well as their newly minted ARM-based server chip business. As we've seen with the console business, the semi-custom business can actually be a pretty nice, stable source of income. This area does not make for particularly high operating margins, but it's a very long-tailed business.

However, what is worth being less optimistic about is AMD's position in micro-servers. This is a market where ARM (NASDAQ: ARMH  ) -based solutions are at an inherent disadvantage. The vast majority of the software in this space is designed, tuned, and validated for x86. While it's not inconceivable that ARM-based products will gain traction, they will need to be significantly differentiated in order to really gain a foothold. If AMD couldn't compete with Intel in the high end of the server market, what makes the low-power market any different?

Foolish bottom line
AMD is in a tough position. Over the course of 2014, Intel isn't going to make it easy on its competitor either in PCs or the dense server market.

AMD could pull a rabbit out of its hat -- or it could still end up going the way of Sun Microsystems and being acquired by a larger player. But it seems that the rest of the chip world, due to the relative ease of obtaining an ARM license, is getting along just fine without AMD. It'll be interesting to see what this company looks like in five years -- if it is, indeed, still a stand-alone entity by then. 

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Read/Post Comments (10) | 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 January 22, 2014, at 9:09 PM, KenLuskin wrote:

    NO ECONOMIC WAY for Intel to INCREASE PC chip market share without DESTROYING THEMSELVES!

    Intel's Guidance is for about $8 BILLION in PC chip sales in Q1.

    AMD’s compute solutions (CS) revenues were $720 million.

    Since Servers and Server chips were at least $120 million of that, leaves PC chips with sales of about $600 million.

    With PC chip sales forecast to decline about 10% in Q1 = sales of about $540 million.

    For Intel to INCREASE share at this point requires that they would LOWER their prices at least 10%.

    So, let us say that Intel discounts their mid and lower end, which equals about $5 billion in sales by 10%

    = a $500 MILLION reduction in revenue and profits.

    PC OEMs are NOT going to let Intel have a total monopoly, so they will continue to buy "some" low end from AMD.

    Therefore, even if a 10% reduction by Intel helped them gain 20% of AMD's $540 million= $108 million increase in sales.

    A $500 MILLION LOSS in revenues and profits, offset by a $108 million increase in sales...

    = about a $400 MILLION reduction in sales and a $400 MILLION reduction in profits!!

    THEREFORE the BS from Intel about taking market share at the low end is a TOTAL LIE!

    _______________________________________

    AMD's sales declined as people in developing countries bought TABLETS and NOT entry level Laptops.

    AMDs' PC sales are NOW so low, that Intel canNOT take market share, without KILLING themselves!!!

    AMD's emphasis on DESKTOPs, that are NOT in competition with TABLETS, means that AMD will be able to maintain sales at least at the level in Q1 of about $500 million.

    There is NO real growth in PCs in total!

    There will be some strength in Desktops as businesses and a few individuals replace XP systems.

    So, AMD's NEW businesses will GROW, while PC sales stagnate at the current level for the rest of the year.

    I see NO downside in AMD from a PRICE to SALES ratio of .62, when AMD is NO longer losing money.

  • Report this Comment On January 22, 2014, at 9:15 PM, KenLuskin wrote:

    The author LACKS any rational analysis.

    He just SPEWS out BS!

  • Report this Comment On January 22, 2014, at 9:17 PM, KenLuskin wrote:

    PRICE to SALES RATIO: AMD=.62 BRCM= 2.05, QCOM= 5.13, NVDA= 1.5, FSL=2.5 , INTC= 2.43, MRVL= 1.6 , TXN= 3.95 , LSI= 2.23

    ADJUSTED for CASH and DEBT.

    So, AMD can DOUBLE in price and STILL be the CHEAPEST CHIP stock.

    In order to match the 2.2 X P/S ratio that LSI is being bought out for.....

    2.2/.62= 354% INCREASE in PRICE for AMD

    3.67 X 3.54 = $ 13/share

    ANY DAY, Shorts can wake up to a BUYOUT of AMD for well over $10/share.

    You have to be an utter MORON to be short AMD now!

  • Report this Comment On January 23, 2014, at 5:20 AM, ara1029 wrote:

    KenLuskin: I wanted to comment but I think you more than covered anything I was about to say!

  • Report this Comment On January 23, 2014, at 6:16 AM, rav55 wrote:

    AMD gained x86 market share. In addition to the laptop, pc, server etc., AMD sold about 7 million x86 APU's for the consoles.

    In short AMD GAINED x86 MARKET SHARE. Now they need to gain market share in the pc and laptop space.

  • Report this Comment On January 23, 2014, at 8:01 AM, bluesky64 wrote:

    Ashrat,

    Did you read AMD received 5 upgrades with yesterday's 4q 2013 38% sales beat and profit beat and raised guidance. AMD received a new price target $ 10.75 Dec 2014. Point and figure charts confirm this trajectory.

    I am glad your INTC mascot.

  • Report this Comment On January 23, 2014, at 8:32 AM, kkuteyi wrote:

    I pray that government will reign in on these fake so called analyst if that is what you call them. Majority do not know what they are talking about. This one in particular is just blowing the air and he will continue to blow air as long as he is on the payroll of the fools. What a perfect name indeed for a company and thus in this case.

  • Report this Comment On January 23, 2014, at 12:16 PM, samiraphd wrote:

    Kind of humorous reading all of the negative reaction to this article, even though the author was spot on with respect to AMD/INTC market share. AMD is clearly in a tough place with respect to PCs, and I wonder if they will choose to exit the market, at least temporarily, if their market share losses continue to the point that producing x86 compatible PC CPUs becomes unprofitable. Potentially, if they are able to do something with the ARMH RISC architecture that might be able to get back in.

  • Report this Comment On January 23, 2014, at 8:23 PM, amdpower wrote:

    Ashraf, being long AMD, I generally don't enjoy your articles. However, unlike some who might have thought that AMD would be surprising this quarter (some even claimed by double!) I considered the street to be about right, which of course they were. I even agreed with your previous article that AMD probably lost market share to Intel in PCs.

    The company certainly has had its share of ups and downs through the years and I have been there to see it all. I remember building my first PC with K6-2's and couldn't believe how "cheap" they were at around $150. There have been slam dunks and complete duds as you would expect from any innovative technology company. And it certainly doesn't help to be competing against the 800 lb. gorilla.

    However, I am very happy with the direction that management is taking and I think you are severely underestimating the potential of HSA and Fusion technologies. AMD has positioned itself in a TREMENDOUSLY ADVANTAGEOUS position with Mantle and the game systems. You are actually seeing developers start to get excited about the technology and have always wanted to program "at the metal" in an efficient manner. The console wins are the icing on the cake. Sparking a 15 minute discussion at an NVIDIA event is cause for excitement indeed (http://www.youtube.com/watch?v=3RF0zgYFFNk). But even so, this is just gaming. Exciting technology but just gaming right.

    I really think that the true value in in HSA. It is not about "Bolting" on a GPU to a CPU as you have stated in a previous article. It is about giving he developer and easy and transparent tool to find the most efficient method to compute. Imaging a SeaMicro server stuffed with Arm, AMD64, GPU cores, whatever. It can be custom designed for the datacenter/cloud provider to perform whatever calculation it is best suited. Why limit yourself to x86-64 if you can simply send instructions to the chip/chips and let them sort out the most efficient way to solve? It is very exciting technology. This is what the APU is all about. It has nothing to do with fancy graphics in a laptop. It is about customized computing cores that can deliver something any large data-cruncher would be happy to buy, a customized hardware solution for THEIR APPLICATIONS.

    I suppose you can just keep on cranking up the RPM's, but I'd much rather be in a camp that is innovating and thinking outside of the box. I'm sure Intel will come along for the ride at some point just like they did with AMD64 (x86-64), and APU's. Hopefully, we'll gather some market share before they do though. Good luck to you in the future.

  • Report this Comment On January 24, 2014, at 12:02 AM, TEBuddy wrote:

    AMD did report earnings double that of estimates. so it was a nice 100% beat quarter.

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