Here's Why Advanced Micro Devices Didn't Rally With Intel

When Intel (NASDAQ: INTC  ) pre-announced materially higher numbers for its Q2 than it had originally guided for, shares of the chip giant lit up to the tune of 6.83%, closing just shy of $30 per share -- a multiyear high. However, smaller PC chip vendor Advanced Micro Devices (NYSE: AMD  ) saw its shares slump 0.23% in Friday's session. While some may argue that what's good for Intel is good for AMD, the market was signaling otherwise.

Intel's beat was driven by corporate PCs; AMD doesn't participate much here
AMD's overall share of the PC microprocessor market is somewhere in the range of 15%-20% with market share within different sub-segments varying. In low-end consumer PCs, for example, AMD has traditionally had north of 50% share, according to Intel's Kirk Skaugen. On the opposite side of the spectrum, Intel's share within corporate PCs has traditionally been over 90%.

So if Intel's big revenue beat is due to business PC sales that are coming in stronger than expected, then it is unlikely that AMD benefited to any meaningful extent this quarter. AMD's PC business is very highly levered to consumer-oriented desktop computers and the low end of the consumer notebook space. Thus, ultimately it will be the secular trends in those segments -- as well as the company's ability to maintain/gain share here -- that will tell the tale.

Key question: Can AMD actually hold or gain share in consumer PCs?
While Intel's business update cited strong performance in business PCs, the question still remains as to whether the consumer PC business in general is set to bottom. This is something that, unfortunately, nobody can predict, but causal observation of the price points and quality of PC designs on the market suggests that, at the very least, there's longer-term hope.

That said, many of the slicker low-cost PC designs have gone to Intel's Celeron and Pentium lineup of chips rather than AMD's Kabini or Beema. For example, notebooks based on Google's Chrome OS are now mostly Intel-powered (with a couple of ARM Holdings-based designs from the likes of Samsung and a few others still on the market). So, if a Chromebook sells in place of a low-cost Windows 8.1 machine, Intel is likely to benefit at the expense of AMD.

However, it's not just Chrome. For example, the Toshiba Satellite Click 2 Windows 8.1 convertible is powered by Intel's Bay Trail-M silicon, but last year's model was powered by an AMD chip. While this (and a couple of other examples) doesn't necessarily point to AMD losing share (for instance, AMD's parts may have wound up in upcoming designs that ultimately sell in higher volumes than some of these converted designs do), it does pay to be cautious here.

Foolish bottom line
AMD may very well do better than expected this quarter, and who knows, perhaps the consumer PC market is getting better as well and AMD's share position is better than it seems. However, the market today was very cautious about running AMD up in sympathy, and for the reasons I've outlined, that's not surprising.

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Read/Post Comments (14) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On June 14, 2014, at 3:27 PM, acemedic wrote:

    Ashraf,

    Most likely the reason why AMD didn't bump with INTC is that AMD had already risen 9% by Friday, which drove a bit of a sell off by the end of the week as folks took their profits.

    Occam's Razor my friend.

    Acemedic

  • Report this Comment On June 14, 2014, at 7:54 PM, ToxyFool wrote:

    Aye media's assessment is right-on. Intel still can't compete with ARM and continues to resort to bribery (ultrabook marketing funds and contra-revenue. They are so desperate they have to sell fab capacity to their competitors. Turns out Godzilla is in fact a dinosaur.

  • Report this Comment On June 15, 2014, at 12:09 AM, TEBuddy wrote:

    Do you have some actual proof that says AMD doesn't get much corporate business? My guess is not, and I don't want to hear about the office you work at.

  • Report this Comment On June 15, 2014, at 12:56 AM, rav55 wrote:

    @Ashraf

    "Can AMD actually hold or gain share in consumer PCs?"

    That is a good question that was partially answered by the EU finding Intel GUILTY of abusing it's monopoly position to bey AMD access to markets. That is a crime.

    Intel has learned that it is cheaper to pay the fine than it is to allow AMD to compete with them in a fair an LEGAL manner.

    And the media doesn;t seem to mind.

    2012 Intel spent $1.2 BILLION in rebates to block AMD.

    2013 Intel spent $3.1 BILLION in rebates to block AMD.

    2014 1st quarter Intel spent $0.95 BILLION in rebates to block AMD.

    If Intel silicon performs so well then why do they need to PAY THE OEM's not to buy AMD silicon?

    To answer your question; as long as Inteel fears AMD presence in the market then they can afford to spend 2x AMD's market cap as rebates to block AMD's market share.

    So it is not likely that AMD will see anything more than a slight increase in market share.

    It's too bad that Ashraf Eassa lacks the moral fiber to even pretend to be outraged at the illegal acts of Intel.

  • Report this Comment On June 15, 2014, at 9:44 AM, CHADBOGA wrote:

    @Rav55,

    Where are you getting your fantasy figures from?

    Especially the $3.1 Billion, Intel supposedly spent in rebates to block AMD?

  • Report this Comment On June 15, 2014, at 10:26 AM, binartech wrote:

    If intel is so great why you insist in writing on AMD ? Forget AMD and go on with your Intel "jurasic" story.

  • Report this Comment On June 15, 2014, at 7:48 PM, rav55 wrote:

    @CHADBOGA

    “Where are you getting your fantasy figures from?

    Especially the $3.1 Billion, Intel supposedly spent in rebates to block AMD?”

    You sir are lazy and ignorant. I should tell you to do your own due diligence. But since you asked and if you know how to read and your reading comprehension is somewhere above the 5th grade I suspect you might get something usefull out of the following.

    How about CBS Market Watch for starters:

    “Intel offers manufacturers who buy its tablet chips rebates. In the first quarter, mobile losses swelled to $929 million. In 2013, Intel lost $3.15 billion in its mobile communications group, as it has tried to make inroads to compete in smartphones and tablets, where chips based on designs from ARM Holdings Plc…

    …“Mobile economics are currently awful. It is imperative that the company grow revenues to the point of at least covering some of their massive opex [operating expenses] spend. However, we have yet to hear any concrete evidence that this is in the cards. 2014 is not the year, nor is 2015; are we waiting for 2016 or even later?”

    http://www.marketwatch.com/story/intel-pushes-into-mobile-bu...

    Maybe the big words confuse you. The Verge makes it pretty clear:

    “Intel is losing billions every year on tablets and smartphones…

    In 2013, Intel's mobile chip division lost a hefty $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.”

    http://www.theverge.com/2014/4/15/5618126/intel-is-losing-bi...

    You will probably find some reason to ignore or other wise try and discredit the above two very reputable sources.

    So please allow me to provide a quote and link from a disreputable source, a writer who completely lacks a backbone and any moral fiber whatsoever, the apologist for the great monopolist; Mr. Ashraf Eassa himself!!

    He is strangely quiet on this topic especially after writing about it just a few months ago.

    However Ashraf did not give the whole storey just his sanitised version of to make it palatable to his readers. Intel calls this "Contra-revenue" I wonder whereOliver North is?

    “Intel's Mobile Group Loses Over $3 Billion in 2013

    During 2013, Intel's Mobile and Communications group generated $1.375 billion in revenue. On that revenue base, Intel lost $3.15 billion.”

    http://www.fool.com/investing/general/2014/04/16/intels-mobi...

    Never ask a question that you don't know the answer. 5 minutes with Google would have revealed to you your answers and you might have learned something.

  • Report this Comment On June 16, 2014, at 5:39 PM, wownwow wrote:

    Could be someting wrong with the tape -- Intel up 0.47% but AMD up 3.74% on 6/16/2014.

  • Report this Comment On June 16, 2014, at 11:49 PM, CHADBOGA wrote:

    @rav55

    So when I ask you to clarify your erroneous claim about Intel spending $3.1 billion to block AMD, you instead switch from AMD to ARM.

    Very intellectually feeble.

    Also, it is obvious that those losses aren't all due to rebates either.

  • Report this Comment On June 17, 2014, at 12:53 PM, TEBuddy wrote:

    Chad, I guess you have to understand how to connect the dots. Intel provides X86 tablet processors. AMD also provides X86 tablet processors. Intel is selling chips at a loss to get them used. AMD has lower cost chips that have worse battery life that are not making it into tablets, because people are getting cheap Intel tablet chips for X86 tablets. Are you that clueless?

  • Report this Comment On June 17, 2014, at 12:56 PM, TEBuddy wrote:

    Fortunately, AMD's latest tablet chips blow Intel's out of the water, but still if Intel sells at a loss, it will be hard for AMD to compete. Intel is anti-competitive in this respect, but because ARM makes up most of the competition in tablets and Intel is a minority there, AMD can't complain.

    Ashraf's prediction appears more wrong than ever as well, as he is a man with little vision and professionalism.

  • Report this Comment On June 17, 2014, at 8:32 PM, CHADBOGA wrote:

    @TEBuddy,

    AMD's chips aren't suitable for tablets because they are power hogs.

    Intel doesn't need to spend a cent against AMD in tablets.

    Also, AMD integration problems are even worse than Intel's, thus further proving the lack of need for any contra-revenue in tablets as far as AMD is concerned.

    It appears you just don't understand the markets being discussed here.

  • Report this Comment On June 17, 2014, at 11:21 PM, TEBuddy wrote:

    No Chad I understand fully and youre making nonsensical generalized statements like an Intel fanatic. There are already some tablets with AMD processors, so I guess that means they ARE suitable, completely contrary to your dumb statement. And the latest AMD APUs blow the previous generations out of the water. So maybe you know nothing.

    So Intel is not losing money to keep AMD out of the market, but in effect, THAT IS THE RESULT. They only get away with it because ARM processors dominate that market.

    Get a brain

  • Report this Comment On June 17, 2014, at 11:25 PM, TEBuddy wrote:

    And Intel Atom can go in small tablets, but they come nowhere close to competing with AMD. The Core based tablets are primarily about 11", which the AMD processors can easily work in and compete on performance to Intel's ultra low power core processors.

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