Intel's Results Probably Spell Bad News for AMD

As many investors are aware, there are only two PC processor suppliers left: Intel (NASDAQ: INTC  ) and Advanced Micro Devices (NYSE: AMD  ) . Further, as investors are probably aware, the PC market has been fairly weak in light of the growth of tablets and smartphones. However, on Intel's earnings call, the company reported PC chip unit shipments that were up 1% year over year, with average selling prices down 3%. This is extremely discouraging for AMD's upcoming earnings report.

This suggests some pretty intense market share loss
According to IDC, the PC market saw unit shipments decline year over year by about 4.4%. Right off the bat, it should be pretty clear that if total units were down 4.4%, then Intel's 1% unit increase means that Intel gained some pretty significant market share, particularly at the low end with Bay Trail-M.

However, what's interesting is that if you assume that Intel has 80% market share and AMD 20%, a 1% unit increase on Intel's part on a 4.4% decline would suggest that AMD lost 460 basis points of share. While I do agree that AMD lost share, the magnitude of the share loss probably wasn't that extreme. So what explains that difference?

Inventory correction and classification issues
On the call, Intel noted that the reason for the disconnect between its unit increase during the quarter and the IDC estimates was partially because PC OEMs had been operating with extremely lean inventory levels and were beginning to bolster then a bit. Something that management also didn't mention is that IDC probably counts netbooks as PCs but doesn't count 2-in-1 tablets with Intel Core processors inside, which also probably added to this disparity. AMD's presence in 2-in-1 designs is fairly minimal, though, so it's still negative for AMD.

What to expect when AMD reports?
The good news is that AMD is already guiding for a 16% sequential decline in the current quarter. This is probably due to a fall-off in game console-related chip shipments as well as an expectation of share loss and a weak PC market. Now, where things could go well for AMD is that it had been modeling in a 10% decline in the PC TAM and probably was not oblivious to the share-loss story that was going on. This still gives AMD room to surprise moderately to the upside.

The important thing, though, will be the Q2 guide. The sell-side is currently looking for $1.36 billion in sales (roughly flat to Q1's $1.34 billion expectation). If AMD isn't able to reverse the share loss that it's currently seeing in PCs, then even this number could be optimistic as the slightly positive effects of seasonality (Intel is guiding to $13 billion for Q2 -- up about 2% quarter-over-quarter) could be offset by the share loss.

Foolish bottom line
It's tough to be bullish on AMD at this point. While the game console revenue stream is nice (and perhaps other semi-custom wins will begin to contribute soon), the PC processor market still makes up the majority of the company's revenues. Until AMD can stabilize and grow its share here, it will continue to suffer the double-whammy of an industry in slight decline and share loss within a declining market. This is hardly the stuff that great long ideas are made of.

While AMD and Intel duke it out, this one stock could skyrocket
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now, for just a fraction of the price of Apple stock. Click here to get the full story in this eye-opening new report.


Read/Post Comments (22) | Recommend This Article (2)

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 April 15, 2014, at 8:43 PM, mwshine wrote:

    "In Q1, Intel's largest business unit, the PC group, saw sales dip 1% year over year to $7.9 billion."

    If you are going to talk up Intel against AMD, you should probably get your facts straight.

  • Report this Comment On April 15, 2014, at 8:57 PM, romeras wrote:

    Intel is losing billions every year on tablets and smartphones

    In recent months, Intel has been under pressure to explain why personal computers haven't been selling quite as well. But the chipmaker may have a more pressing concern: losing billions of dollars on mobile. In 2013, Intel's mobile chip division lost a staggering $3.15 billion, after posting an operating loss of $1.78 billion in 2012. In the first quarter of 2014 alone, the Mobile and Communications Group saw a $929 million operating loss on a meager $156 million in revenue, according to new financial results issued today by the company.

    While we'd previously seen Intel struggle for success with smartphones and tablets, this is the first quarter that Intel has broken out numbers for the mobile division alone, which is responsible for Wi-Fi, Bluetooth, GPS and other mobile connectivity in addition to the processors that feature in such devices.

    --------------------------------------------------------------------------------

    560-intel-profit-loss

    On the bright side, the company's budding Internet of Things business — also freshly revealed in this quarter's results — seems to be doing well, managing nearly a half-billion in sales each and every quarter.

    We'll be on Intel's Q1 2014 quarterly earnings conference call later today, and will let you know if the company says anything else intriguing.

  • Report this Comment On April 15, 2014, at 8:58 PM, romeras wrote:

    Intel is losing billions every year on tablets and smartphones

    In recent months, Intel has been under pressure to explain why personal computers haven't been selling quite as well. But the chipmaker may have a more pressing concern: losing billions of dollars on mobile. In 2013, Intel's mobile chip division lost a staggering $3.15 billion, after posting an operating loss of $1.78 billion in 2012. In the first quarter of 2014 alone, the Mobile and Communications Group saw a $929 million operating loss on a meager $156 million in revenue, according to new financial results issued today by the company.

    While we'd previously seen Intel struggle for success with smartphones and tablets, this is the first quarter that Intel has broken out numbers for the mobile division alone, which is responsible for Wi-Fi, Bluetooth, GPS and other mobile connectivity in addition to the processors that feature in such devices.

    --------------------------------------------------------------------------------

    560-intel-profit-loss

    On the bright side, the company's budding Internet of Things business — also freshly revealed in this quarter's results — seems to be doing well, managing nearly a half-billion in sales each and every quarter.

    We'll be on Intel's Q1 2014 quarterly earnings conference call later today, and will let you know if the company says anything else intriguing.

  • Report this Comment On April 15, 2014, at 8:59 PM, keeperoftheq wrote:

    What a difference a year makes. Losses are behind us. Bashers look back but longs look forward.

    Q1 2013 revenue $1.09 billion loss of $98 million. loss per share of $0.13

    Q1 2014 FORECATED REVENUE $1.34 BILLION. WITH GAME CONSOLES AND GPU SALES BEING STRONG AND PC SALES DID NOT DECLINE AS MUCH AS PROJECTED PLUS THE APPLE MAC PRO IS SELLING VERY WELL .WE CAN EXPECT MORE REVENUE AND A PROFIT.

    Q2 2013 revenue $1.16 billion loss of $29 million loss per share of $0.10

    Q2 2014 FORECASTED REVENUE $1.36 BILLION. EXPECT THAT TO CHANGE ONCE AMD GIVES Q2 GUIDANCE IN THE Q1 REPORT. GAMD CONSOLE COMPONENT SUPPLIERS HAVE REPORTED VERY STRONG ORDERS THAT USUALLY DOES NOT HAPPEN UNTIL Q3. TSMC AND GLOBAL FOUNDRIES WILL BOTH BE MAKING THE GPU CHIPS AND CONSOLE CHIPS BECAUSE OF SUCH HIGH DEMAND

    XBOX ONE LAUNCHES IN 25 MORE COUNTRIES IN SEPTEMBER. MILLIONS OF APU'S WILL NEED TO BE ORDERED IN Q2 FOR THESE LAUNCHES.

    Q3 2013 revenue $1.16 billion, $29 million loss, loss per share of $0.09

    Q3 2014 NOT PROJECTED YET BUT KNOWING THAT Q1 AND Q2 ARE THE SLOWEST QUARTERS AND GAME CONSOLES WILL BE PREPARING FOR THE HOLIDAY SEASON AND WILL BE IN FULL SWING PRODUCTION. MANY NEW PRODUCTS WILL BE LAUNCHED USING AMD. THE APPLE MAC PRO WILL BE BRINGING IN MORE REVENUE TO WHERE WE HAD NO MAC PRO SALES IN Q3 LAST YEAR.

    FY 2013 •AMD revenue of $5.3 billion loss of $83 million and loss per share of $0.11

    FY 2014 FORECASTED $5.75 BILLION. THIS WILL ALSO INCREASE AS 2014 UNFOLDS. THIS FIGURE DOES NOT FACTOR IN OVER 22 MILLION GAME CONSOLES BEING SOLD FOR THE YEAR, ADDED GPU SALES FROM "BOTH" TSMC AND GLOBAL FOUNDRIES MAKING THE GPU AND CONSOLE CHIPS DUE TO SUCH STRONG DEMAND. THIS DOES NOT INCLUDE A FULL YEAR OF THE APPLE MAC PRO SALES. ADD IT ALL UP AND WE SHOULD SEE $2+ BILLION IN REVENUE MORE THAT ESTIMATED BY THE ANALYSTS.

    2014 will mark the year of record short covering and share price. short positions will drop down over 100 million shares

  • Report this Comment On April 15, 2014, at 9:07 PM, keeperoftheq wrote:

    Steam Hardware & Software Survey: March 2014 AMD gained market share in Q1

    From December that is Intel losing 0.36% AMD gaining 0.36%. This is small for Intel but for AMD it represents close to $300 million in revenue.

    OCT Intel 74.00% AMD 26%

    DEC Intel 74.7% AMD 25.93%

    JAN Intel 73.78% AMD 26.21%

    MAR Intel 73.64% AMD 26.36%

    Intel -0.14% AMD + 0.15% From January to March.

    0.15% market share is not much to Intel's $8 million in PC revenue but for a company like AMD, that is an increase in $120 million in revenue

  • Report this Comment On April 15, 2014, at 9:20 PM, RCM0102 wrote:

    If The Fool has this guy writing for them I want a refund of my membership

  • Report this Comment On April 15, 2014, at 10:15 PM, rav55 wrote:

    @Ashraf

    You are of course aware that AMD modified the wafer agreements and INCREASED production by almost 30%?

    Is this this the act of a company on the brink of failure as you so obsessively prognosticate?

  • Report this Comment On April 15, 2014, at 10:18 PM, KenLuskin wrote:

    AMD was UP 3 cents in the AH.. so You are WRONG as usual Ashrat!

    You are a broken record, constantly bashing AMD, and making a fool out of yourself with MIS information.

    AMD went into Q1 with only 10% market share in laptops, but with 20% in Desktops.

    The weakness in laptops is being offset by Desktops.

    AMD has been TAKING market share from Intel almost every quarter in DESKTOPS!

    So, AMD is GROWING in the strongest part of the market, leaving Intel with greater exposure to the weakest part of the market.

    The reason AMD is growing in commercial and DESKTOP is because AMD offers much better value, and slightly reduced energy use is meaningless in desktops.

    AMDs' Server share was only 3.2% so that cannot decline much more, and is actually positioned to grow later this year.

    AMD will REVS will be UP at least 22% year over year, in Q1 and Q2 while Intel is Flat at best!

    Console demand will RAMP up every quarter this year!

    This is the first 12 months of the new consoles, and volumes do NOT top out until year THREE!

    AMD will be GROWING over the next 2 years, while Intel will be sucking hind ...

    JUST LIKE YOU!

  • Report this Comment On April 15, 2014, at 11:30 PM, AMDTheRising wrote:

    keeperoftheq I ran the numbers and got pretty darn close to what you did...I thought that I must have done it completely wrong at first because how much it increased their profit! I am seeing a lot of people pulling the 4.4% magic number out of the air today and the real number is 1.7% decline GLOBALLY for PC sales.

  • Report this Comment On April 16, 2014, at 12:22 AM, anubis44 wrote:

    I agree with many other commenters that notebook/laptop computers are starting to be devoured by tablets. Back in the early 2000s, the talk was all about how notebooks would surpass desktop computers in numbers sold and in terms of importance, but several factors have turned the tables back in favour of desktops, albeit, in a somewhat diminshed overall x86 market. In short, I see people using smartphones with screens of approximately 5" remaining fairly consistent for the forseeable future, tablets of approximately 8"-12" for 'portable computing', and desktops for when they want to sit down and do something meaningful, i.e. compose a long letter, edit photos, play games (or a dedicated game console), etc., but the x86 notebook will become a much smaller market niche. If so, this bodes very well for AMD, as it has an ever-increasing market share of the add-in graphics and professional graphics card businesses, and their APUs must inevitably supplant Intel's CPUs as desktop computers become the ubitquitous appliance they mostly already are. In such a market place, there is room for the 'mainstream' and the 'premium' brands, just as there's room for Apple at the high end of smart phones, and the Android universe for everybody else (who isn't too stupid to pay the Apple tax, I might add).

    Just as Coke could never ultimately destroy Pepsi, Intel will not ever quite be able to destroy AMD. Of course, unlike Pepsi, AMD has many, many more options and strategies up their sleeve.

  • Report this Comment On April 16, 2014, at 2:05 AM, soid212 wrote:

    @author With due respect, AMD will be posting growth figures in Q1 and that is for sure, AMD does not have market share like Intel and it serves gaming oriented PC market where the decline in growth is not that much. and even you admit that AMD is doing well in graphics, Now, semicustom, professiona graphics and microserver. AMD is not going to shrink any time soon. You pessimism is wrongly placed.

  • Report this Comment On April 16, 2014, at 2:17 AM, TMFAeassa wrote:

    @ sold212

    AMD's GPUs serve the high end PC gaming market, but AMD's CPU products probably don't have all that much share in the enthusiast space. Most of AMD's revenue base is still computing solutions and not graphics & visual computing.

  • Report this Comment On April 16, 2014, at 5:34 AM, raghu78 wrote:

    ashraf

    GVS with USD 869 million overtook CS with USD 722 million in Q4 2013. AMD is increasing orders on consoles as demand is outpacing supply

    https://finance.yahoo.com/news/tsmc-raises-q1-outlook-margin...

    http://www.taipeitimes.com/News/biz/archives/2014/03/14/2003...

    "JPMorgan Securities analyst JJ Park said that TSMC’s new financial forecast confirmed his expectation of “a strong comeback in 28nm demand from MediaTek (聯發科), Hisilicon (海思半導體), Qualcomm... and ongoing game console strength from AMD [Advanced Micro Devices].”

    http://www.taiwannews.com.tw/etn/news_content.php?id=2456652

    TSMC increased their guidance in March 2014 and beat that too last week. a 11% Y-o-Y increase and a 1.65% Q-o-Q increase in a seasonally down quarter is unheard.

    AMD is one of the major reasons for this surprise. AMD has addressed the GPU shortage as R9 290 series is in plenty supply. R295x2, FirePro W9100, the unbelievably high demand for Mac Pro in which AMD GPUs are sold along with strong PS4 and Xbox One sales mean GVS is on track for a blowout quarter. Expect revenues to surprise at USD 750 - 800 million.

    IDC numbers are for PC sales in Q1 2014. those PCs are manufactured much earlier and the CPUs in them would have been sold to OEM in Q4 2013. Intel and AMD CPU sales in Q1 2014 will reflect what OEMs are buying now for integrating into PCs in Q2 2014 and for the crucial back to school season.

    AMD's low cost desktop platform is off to a good start beating Baytrail-D.

    http://www.anandtech.com/show/7933/the-desktop-kabini-review...

    http://www.tomshardware.com/reviews/athlon-5350-am1-platform...

    Beema will take share back from Baytrail-M. With Mullins AMD finally have a tablet SOC which is competitive and we are sure to hear about design wins from OEMs at Computex 2014.

  • Report this Comment On April 16, 2014, at 9:29 AM, rav55 wrote:

    The unexpected and unplanned success of PS4 and XBOX, coupled with the virtually serendipitous discovery of Radeon being the crypto-currency mining card of choice along with the very successful price war with nVidia this past Holiday season as well as an almost 30% increase in production with new wafer agreements would suggest that AMD could very well surprise.

    Now, given that the expectation of flat to slightly negative earnings is wholly based on guidance from Rory Read one has to wondeer if Mr. Read was hedging a tad.

    This would be especially so given the recent spate of class action lawsuits over Reads optimistic comments regarding Llano sales which fell unexpectedly flat.

    So perhaps Read is playing this quarter close to the vest in order to generate some tension and surprise and punish the shorts.

    What CEO doesn't want to punish short sellers anyway?

  • Report this Comment On April 16, 2014, at 9:30 AM, Beerfloat wrote:

    Vocal minority is vocal.

    AMD is still in the dumps and stock is going to take a big hit on April 17th.

  • Report this Comment On April 16, 2014, at 12:17 PM, TEBuddy wrote:

    Well, computing solutions might be the majority of AMD's revenue, but graphics grew incredibly last year and in 2014, so I would not say that it is most of AMD's revenue. Like 60/40 split now with console APUs under graphics, which robs from computing solutions. But I wouldn't expect a simple ole tech write to understand any of that.

    And besides, 2014 will see a rise in computing solutions revenue when AMD finally releases something new in the world of servers and Beema and Mullins are shipping. So there are a couple catalysts this fool author doesn't understand either.

  • Report this Comment On April 16, 2014, at 7:43 PM, mtechac wrote:

    If Ashraf came out again to put down AMD and try to boost Intel, then that means that Intel is toasted and AMD will continue to improve its business.

    Intel is toasted. If it has to give money to companies to buy their products in the lower end, then Intel is going broke sooner or later.

    Intel can play with marketing and with its financial numbers, but now that ARM, APPLE, Samsung, AMD, Texas Instruments, Qualcom, etc. are all going 64-bit ARM, Intel will begin losing its highest profit area that is keeping it afloat and will sink like any body who follow Ashraf's investments advice..

    Intels servers, workstations, high-end laptops, etc.. are going down now that it is loosing APPLE as a 64-bit processor customer, and now that all the other companies have their own 64-bit processors.

    Knowing that ARM designs can be built 2 to 4 times faster than any Intels designs means that Intel will become obsolete in the next couple of years. For now, Intel has a chip foundry process advantage but it cost billions of dollars which is why AMD intelligently got out of that business. Intel hasn't even deeply reorganized to survive in a low-profit product margin world..!!

    Only fools (no pun intended) don't see the 18-wheeler truck that is about to hit Intel at full speed.

  • Report this Comment On April 17, 2014, at 6:46 PM, H2323 wrote:

    What are you smoking....AMD's earnings show that there PC segment is growing and will continue to grow faster than the market is shrinking, thus they are taking Intel share. Intel's forecast is flat, so they hope to not lose any share. It's bullish for AMD.

  • Report this Comment On April 17, 2014, at 6:48 PM, longtbt wrote:

    crow is back on the menu.....

  • Report this Comment On April 18, 2014, at 5:14 AM, Stuart511 wrote:

    Ashraf,

    Wrong again, better cover your short position.

  • Report this Comment On April 21, 2014, at 1:30 PM, rustianowski wrote:

    Pretty sure this guy got laughed off of SA, because of his Anti-AMD stance. AMD will continue to gain market share over Intel and Nvidia as people are starting to realize that their products are priced accordingly and perform just as well as their counter parts. The only reason AMD hasn;t rocketed up sooner is because of their marketing department is really lacking. Ask an average person and they have no idea the benefits of an AMD APU. Once they start learning about AMD's products, I would expect a large spike in share price.

    Ashraf, it will only be a matter of time before the fool stops allowing you to contribute much like SA has. Enjoy your propaganda while it lasts.

  • Report this Comment On April 21, 2014, at 4:35 PM, MeirElazar wrote:

    If anyone wishes to check out this author's credibility please see his article on March 20th titled "Amd looks finished" along with all of the reader's comments.

    http://seekingalpha.com/article/2099473-amd-looks-finished

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2916891, ~/Articles/ArticleHandler.aspx, 9/2/2014 10:22:10 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement