Advanced Micro Devices' (NASDAQ:AMD) larger peer, Intel (NASDAQ:INTC), reported results that were clearly negative. While the results weren't great for Intel (particularly the weakness in enterprise data centers), they were even worse for AMD. In particular, Intel was able to maintain roughly flat PC sales for Q4 2013, implying that -- in a down PC environment -- AMD lost some pretty significant share during the quarter.
The rough math
According to Gartner, a leading market research firm, PC shipments were down about 6.9% during Q4 2013 from the year-ago period. Note that in Intel's Q4 results, while PC sales as a whole were down for the year, the company actually managed to guide to flat revenue for the quarter on a year-over-year comparison.
These numbers tend to suggest that Intel managed to take some pretty significant PC revenue share for the quarter from AMD as this space has precisely two competitors. Driving this was likely the following factors:
- AMD's competitive position in the higher end of the PC market (where tablet cannibalization seems nearly non-existent) is not particularly good from either a cost-structure perspective or from a performance/watt perspective. It is difficult for AMD to compete (profitably) on cost.
- Intel, which has traditionally not played aggressively in the low end of the PC space, is desperately trying to keep its revenue base in PCs afloat. This suggests that Intel will fight very aggressively for share in the lower end, which may manifest itself in Q4.
It will get worse
Throughout the year, Intel will push its Bay Trail-M parts to gain market share at the low end (and, thanks to the improved power characteristics of this part, it should enable more aesthetically pleasing designs). While AMD has a performance-competitive part with "Kabini" for the lower end of the market, the major concern here is that Intel still has both a superior cost structure and more marketing clout.
On top of that, Intel typically works very closely with its OEMs to "fine tune" the systems that they ship. AMD does so as well, to the extent that it can, but it will be extremely difficult for AMD to compete with what is likely to be aggressive pricing as well as branding/marketing support.
Intel shielded by enterprise, AMD not so much
One final point to note is that Intel saw strength in enterprise/business PC sales, a market segment in which AMD is not a particularly large player. This would tend to suggest, then, that Intel is better exposed to the healthier sub-segments of the PC market. Of course, on the flip side, AMD is quite exposed to the lower end of the consumer market, which (particularly in the Asia-Pacific region) is vulnerable to tablet cannibalization. Intel also noted strength in the enthusiast/gamer market where, once again, AMD's processors are generally viewed as inferior (as they lack the raw performance to adequately compete).
This quarter is likely to be particularly ugly for AMD, which is exposed heavily to the low end of the PC market. In addition to secular difficulties for this segment, there will be an unprecedented competitive threat that emerges in 2014 and becomes much worse over the next two years as Intel's low-end PC lineup becomes more potent. As a result, the company needs to compete in tablets at a good cost structure against powerful opponents.