AMD’s New Reporting Structure Will Mask PC Weakness

It has been quite clear that Advanced Micro Devices (NYSE: AMD  ) continues to bleed market share in the PC processor market to larger rival, Intel (NASDAQ: INTC  ) . At the high end, AMD's parts aren't performance (or power) competitive, and at the low end, Intel has been successful in taking share with its new Atom-based Pentium/Celeron products. So, it's not surprising that AMD has decided to fundamentally reorganize the company and – more importantly – the reportable segments.

What's the new reporting structure?
AMD's new organizational structure will consist of the following:

AMD's A10 APUs are among the higher end of the company's PC processor product stack. Source: AMD.

  • Computing and Graphics. This will include client CPU/APU sales and graphics cards.
  • Enterprise, Embedded, and Semi-Custom. This group will consist of – you guessed it – server-oriented processors, embedded products, and semi-custom products.

This reorganization makes a lot of sense from a "managing expectations" perspective. The computing and graphics will probably be viewed as a "legacy" business that doesn't necessarily need to do all that well, but strategic enough to keep around. The Enterprise, Embedded, and Semi-Custom, on the other hand, will be starting from a relatively low base so AMD can point to very fast year-over-year growth in the segment for several quarters.

Computing and Graphics will keep investors from knowing how bad PC microprocessor sales are

AMD's Radeon branding is well-known among gamers. Source: AMD.

Indeed, in the most recent quarter, AMD's computing solutions division was down 11.7% from $751 million to $663 million in net revenue. Intel's PC Client Group, on the other hand, came in at $7.941 billion – down only 1.4% (units were actually up, so the revenue number represents a greater presence in the low end of the market). It's well known that AMD's graphics chips are actually quite competitive with what rival NVIDIA (NASDAQ: NVDA  ) has to offer, so that business is likely to be stable, but AMD's PC processors just don't seem to be enough to stop Intel from continuing to rip away share.

It really does make sense to just merge PC graphics and PC CPUs/APUs so that combined this new "legacy" business doesn't look as weak as the computing solutions segment on its own would suggest. This doesn't change AMD's fundamentals, but it does make things optically better.

Enterprise, Embedded and Semi-Custom will look attractive
AMD is basically starting from next-to-zero in server processor sales at this point, its embedded business is also fairly new in its current form, and of course semi-custom is still in the early innings of the game console ramp as well as whatever new projects eventually come in.

Microsoft's Xbox One is powered by a semi-custom AMD chip. Source: Techinsights.com.

As a result, this business is likely to be a very high growth rate one, albeit from a fairly low revenue base. AMD will point to the high growth here and as this segment becomes a larger part of AMD's revenues, the market is likely to care less about AMD's competitive positioning in PCs.

Foolish bottom line
AMD's reorganization doesn't fundamentally change much. However, the mew reporting structure is much more useful as AMD seems to be heavily promoting itself as a company that will no longer be heavily dependent on PC sales. Further, the new structure will ultimately serve to make the company "look" better – and there's nothing wrong with that.

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Read/Post Comments (18) | 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 June 16, 2014, at 5:39 PM, stock123 wrote:

    LOL, you really know how to make a title that uniquely identifies you...

  • Report this Comment On June 16, 2014, at 6:54 PM, stringsof12 wrote:

    Do you just write negative articles because you feel they give you more click through? This article is pointless, AMD is still reporting those figures like they have before. However now that their semi custom market has grown so greatly they need a new reporting structure. I don't feel it's article worthy.

    Also most people don't buy Intel over AMD because Intel chips are better, they do it because that's what is recommended by the guy at the store or their kid, or just what they grab from the PC vendors site.

    If they knew how much better the graphics of the A10 APUs are compared with Intel HD graphics it would be a no brainer.

  • Report this Comment On June 16, 2014, at 7:03 PM, rav55 wrote:

    @Ashraf

    Why didn't you write a piece that described Intel's reporting structure regarding the Communications and Mobile Group's mssive losses as trying to hide the fact that Intel margins would be dropping due to the massive rebates that casued $6 BILLION in total losses?

    Intel took the entire unprofitable tablet and mobile market segment and reorganised it in such a manner that the rebated silicon sold by that Group would not impact margins for PC"s and Server's.

    Why didn't you write about that sleight of hand Ashraf?

  • Report this Comment On June 16, 2014, at 7:11 PM, rav55 wrote:

    @Ashraf

    Why are you so afraid of AMD?

    AMD has a market cap of $3.38 BILLION

    Intel has a market cap of $149.39 BILLION

    AMD is 2.2% of the size of Intel.

    You spend your entire waking life trying to write pieces that try and generate a level of feear in the AMD investor.

    Why are you so obsessed with AMD?

    You entire body of work show's an alarming predisposition to cause harm.

    Why?

  • Report this Comment On June 16, 2014, at 7:32 PM, mtechac wrote:

    These articles are for investors and other people who are in the business of making money.

    Ashraf doomed AMD when it was in the $1.00 range, it doomed it when it was in the $2.00 range, it doomed it when it was in the $3.00 range, and it is dooming when it is only in the $4.00 range.

    Anybody who listened to him, already lost a huge investment opportunity by hearing a guy who hates AMD and just likes Intel, which hasn't gone to any place.

    AMD will be back to its normal $15.00 range and will not be surprised it will go back to its $30.00 dollar range since they released their first true hybrid HSA/hUMA fused native CPU/GPU architecture which nobody have one yet and not even Intel can make one, since they don't have the high-end GPU IP to make one.

    I feel sorry for anybody who listens to this guy and to any Intel stock holders that follows Ashraf lunatic assertion that Intel will soon double, when in reality, Intel will be hit pretty hard by all the 64-bit ARM processors being released this year.

    The 64-bit ARM chips/hardware will hit Intel's highest profitable areas: 64-bit servers, workstations, laptops, etc. Intel does not have the right business cost model to make money without a deep reorganization and its CPUs are antiquated, technology wise. Great foundry and chip process, but the architecture is too old, it takes too much money and time to design new ones (compared to ARM) and x86 has too much baggage compared to ARM.

    The 64-bit ARM chip that are, or will be, released by APPLE, Samsung, AMD, Qualcom, TI, etc. will really knock the air our of Intel stock, at least for the next two years since Intel has not done its duty to get prepared for these new low-profit product margin eras..

    Luckily, I don't listen to this guy, and am making great goods, but I like to warn other people because bad advise can cost huge amounts of money for naive people who read this kind of guys articles..

    Proof of this is just reading his articles where he dooms AMD while it is doubling in price. Intels stock price have been in the $20.00 range for the last 10 years and there is no way in hell that they will go up when they are losing not only their market share but their key customers who are making their own 64-bit ARM chips..

  • Report this Comment On June 16, 2014, at 7:33 PM, ToxyFool wrote:

    @ rav55: Because Ashraf is devoid of any scruples, period. He is only a self-serving pumper trying to protect his own investment. A real shame TMF has anything to to do with him.

  • Report this Comment On June 16, 2014, at 7:54 PM, rav55 wrote:

    @ToxyFool

    A man is known by his work. When does Ashraf's body of work cross the line of trying to cause deliberate harm to AMD?

    When does a body of work of ignoring facts, not checking facts, distorting truths and omitting the truth become libel?

    AMD has been the best friend the IT consumer ever had. Without AMD, your laptop or PC would have a $1000 cpu running at half of the speed. And Intel would be reporting 50% margins.

    In fact without AMD, the Justice Department could simply invoke the AT&T solution: break Intel up for exerting a monopolistic influence in the marketplace. Or at the very last emulate IBM's solution and force Intel to grant nVidis or other strong competitor an x86 architectural license

    I find it very telling that rather than comment on the piece. Folks hear rather comment on the author. I do not read Motley Fool pieces for ANY other stock because they have no credibility.

    TMF is no Barron's. Rather than create a culture of irrefutable journalistic integrity they have taken the low road of yellow journalism. Nobody cites TMF. TMF has become a carricature, a parody; a very bad joke.

  • Report this Comment On June 16, 2014, at 9:45 PM, ta152h wrote:

    Ashraf,

    This article should be beneath you. Really, it's shameful.

    It's a pity you don't just stick to facts, instead of putting perverse twists on what others are doing, when you can't possibly know their primary motivation.

    Hopefully, you'll outgrow this nonsense. When you do, and stop with your bias towards Intel, you'll be an asset to the investor's community.

    You can keep tearing on AMD, and that's all this is, but I keep making money on them. Almost 3K just today. Tons since it was below $2 a share (About the only time I ever time a stock near the bottom; I always end up screwing that up).

    So, for all your bile towards AMD, it's making a lot of us a lot of money. I think even more in the future.

    Negative, uninformative articles do not change that, they just make people more correct when they criticize you.

  • Report this Comment On June 16, 2014, at 10:30 PM, MrClean wrote:

    Good read Ashraf, thanks for bringing the FUD busting Facts,

    Debt laden AMD is covering up the Fact that it can't compete in the desktop and Laptop market, its own GPUs are marketed using benchmarks using Intel CPUs because AMD's GPUs would be severely bottlenecked by its IPC crippled APUs and CPUs. Debt hobbled AMD survives on the low margin game console market that will soon be made obsolete by more powerful small form factor PCs with Intel/Nvidia inside.

    AMD is late and lame to the ARM party and bringing only a generic off the shelve 64 bit ARM core to fight against an entrenched well ARMed Armies using custom cores.

    Debt doomed AMD, all hype pumping propaganda all the time.

    Intel needs to build Nvidia GPUs on its best in the world process to put a end to debt wallowing AMD or just buy Nvidia. Intel's upcoming 14nm Broadwell and Skylake will continue to put a beat down on AMD in every market.

    AMD will be a GREAT Short play when the Facts burst AMD's propaganda pumped bubble.

  • Report this Comment On June 16, 2014, at 10:33 PM, ToxyFool wrote:

    @ rav55: Indeed. As bad if not worse than Seeking Alpha or Trefis.

  • Report this Comment On June 16, 2014, at 10:56 PM, TEBuddy wrote:

    MrClean, was your head going to burst if you didn't get all that hot air out?

    Strange how AMD's non-competitive APUs beat comparable Intel CPUs in many every day benchmarks. And AMD's 2 year old CPUs STILL beat Intel in highly parallel applications. I can't wait for the short squeeze that you lose your mind on.

  • Report this Comment On June 17, 2014, at 5:25 AM, rav55 wrote:

    @tat52h

    "So, for all your bile towards AMD, it's making a lot of us a lot of money. I think even more in the future."

    Ashraf has no impact in AMD's or Intel's valuation.

    Nobody really pays attention to Ashraf unless their nose is a tad brown, like yours.

  • Report this Comment On June 17, 2014, at 5:34 AM, JonnieM wrote:

    In Nvidia's last earning's conference call, they commented that most gamers prefer a PC based system rather than a console such as Xbox/PS4. I realise Nvidia's board are hardly impartial, but this is surely a bad trend for AMD who seem to be concentrating on APU's which on their own don't have nearly as much oomph as a CPU plus performance GPU card, and semi custom console chips where the console market is already becoming competitive with the contingent price squeeze on component suppliers.

    And given AMD's history of tearing up roadmaps (there was me left waiting at the station for Opterons with PCIe gen 3) and very few enterprises are going to base compute stsrems on their heterogenous systems.

  • Report this Comment On June 17, 2014, at 9:38 AM, raghu78 wrote:

    ashraf

    Even by you standards you have new lows with this drivel. Anyway right now people read your stuff for entertainment rather than expecting any kind of good logical analysis. Anyway for Q2 2014 the reporting will be as it was. Any changes will happen in Q3 2014 reporting. Keep up with the trash writing Intel pumper.

  • Report this Comment On June 17, 2014, at 9:39 AM, fastestxc wrote:

    I'm bullish on AMD long term but I agree 100% with you Ash. They had just gone through a change in reporting structure and how their doing it again so soon. Has to be that they're trying to mask the fact that Business PC segment didn't do anything for them. Also, Digitimes has been reporting that video cars would be selling much less in Q2. With all this, I think I'm just going to take profits.

  • Report this Comment On June 17, 2014, at 12:21 PM, Impetusin wrote:

    Oh what a surprise. Another negative piece on AMD by TMF.

    Meanwhile the stock continues to climb past its less than 2 dollar a share low and constantly surprise the writers here with results each quarter. I remember another company that was completely bashed by TMF into the ground as certain to fail called Pandora.

    One wonders if they switched their stock pick strategy to whatever this site was constantly claiming to be a failure each and every day there may be a good chance that they could become successful beyond their wildest dreams!

    In any case, you're not wrong on your points, but you're putting them together wrong. Time shall tell.

  • Report this Comment On June 17, 2014, at 5:03 PM, maarten12100 wrote:

    @MrClean

    First of all Intel's fabs are horrible for a gpu as they are not optimized for it at all. It is less than half the density and that is talking about the "gpu" portion of Intel's chips.

    Also Nvidia is a direct competitor so they will never fab anything for them it would be stupid to do so.

    AMD's beema laptops have various 1080P laptops with dgpu combos at the 300, 400 and 500 euro price point. (Germany, Austria, Netherlands) and I'm quite sure the US has the same lineup at lower prices.

    you say "debt laden" well AMD isn't debt laden at all actually the long term debt is only 2Bil.

    And with the take or pay agreement taken care of by fabing kaveri, mullins/beema, various gpus and in the future the console APUs there AMD will have more free cash and a better process node.

    That normal ARM core is just this year as a stop gap but the best engineers in the world are working on the new ARM core.

    "We can easily forgive a child that is afraid of the dark, The real tragedy of life is when men are afraid of the light"

  • Report this Comment On June 20, 2014, at 1:13 PM, MrClean wrote:

    "AMD will be a GREAT Short play when the Facts burst AMD's propaganda pumped bubble."

    Debt Doomed AMD BUSTED by cryptocurrency GPU mining Bullcrap.

    Thanks AMD for the money making SHORT Play, that's my favorite way to play propaganda pumped AMD.

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