Can AMD Finally Find Its Own Way?

On Thursday, Advanced Micro Devices (AMD -0.35%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

AMD has struggled throughout its existence, laboring in the shadow of Intel (INTC 0.64%) during the heyday of the PC and more recently falling behind many other rivals in the mobile revolution. Can the company finally get its strategy right, or is it doomed to failure in both market niches? Let's take an early look at what's been happening with AMD over the past quarter and what we're likely to see in its quarterly report.

Stats on AMD

Source: Yahoo! Finance.

Will AMD get the chip off its shoulder this quarter?
Analysts haven't had much hope for AMD's earnings in recent months, having widened their loss estimates for the just-finished quarter by $0.01 per share. Their call for full-year 2013 has gotten worse still, with a $0.04 per share increase in expected losses. The stock has reflected similarly pessimism, dropping 9% since early January.

AMD has a long history of struggling behind Intel's dominance in the PC market. Yet even with its also-ran status in PCs, AMD remains sensitive to the conditions of the overall industry, as the stock fell alongside Intel after last week's report of plunging PC sales.

In order to survive, AMD appears to be trying its hand at certain niche markets. Last month, AMD invested in Aviary, a privately held company that makes photo-editing software. If the move gets AMD better exposure in high-potential areas like high-level digital photography and professional graphic design, then it could give it a competitive advantage over Intel and other rivals.

Yet it's unclear that the niches that AMD is targeting are big enough to keep the company moving forward. For instance, reports that Microsoft (MSFT 0.37%) will include AMD chips in its coming new upgrade to its Xbox gaming console were enough to send AMD stock soaring. Yet even with Microsoft's past success in the gaming space, it's far from clear whether a refreshed Xbox will have the same success in light of increased online gaming. Moreover, even success for Microsoft might not give AMD's revenue enough of a boost to make a lasting difference.

In AMD's quarterly report, watch for more substantial initiatives to try to penetrate the mobile market or other high-potential specialty areas. Without something to distinguish AMD from its competitors, it's hard to see the stock moving higher in the near future.

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