Advanced Micro Devices Inc.
) announced that it is supplying custom AMD Radeon HD GPUs to
) newly-launched Wii U home consoles. This custom graphic
processing unit (GPU) will enable Wii U to support
high-definition (HD) video for games.
The Wii U is Nintendo's first offering with HD graphics.
Moreover, this is the first console upgrade by Nintendo in six
years since the release of Wii. Gamers appear enthusiastic about
the new console, as evident from the fact that Wii U is already
sold out in many U.S. stores. Research firm IHS is also
optimistic, expecting Nintendo to sell 3.5 million Wii Us in the
U.S. this year. Obviously, the success of the Wii U will benefit
AMD, which may compensate for its recent poor showing versus
). AMD and
) are the main contenders for discrete graphics sockets, so this
may be considered a key win for AMD.
Nintendo launched the AMD-powered gaming consoles just before
the holiday season. This makes sense, as the holiday season is
usually the time when demand goes up.
) PlayStation leads the global console market with 38.8% market
share. It is followed by
) Xbox 360 with 34.9% market share and Nintendo with 26.3%
The gaming hardware market is currently reeling under
competitive pressure from emerging social network sites and
competing hardware platforms such as smartphones and tablets.
Gamers are switching to these platforms or devices as they also
provide free games. Gaming apps are also providing various
fun-filled and thrilling games, which are successfully enticing
A study conducted by DFC Intelligence suggests that the global
gaming market is expected to increase from $67.0 billion in 2012
to $82.0 billion in 2017. Further, IDC is expecting that there
will be 257 million active consoles worldwide by 2015. These
estimates suggest that there are opportunities for gaming
companies to increase their stakes.
AMD's revenues in the third quarter came in at $1.27 billion,
down 10.2% sequentially and 24.9% year over year, more or less in
line with its revised guidance of a 10% sequential decline (at
the mid-point). Revenues were also in line with consensus
expectations of $1.28 billion. The Graphics business generated
27% of its sales and was down 6.8% sequentially and 15.1% from
the year-ago quarter.
AMD's shares currently carry a Zacks #5 Rank, implying a
Strong Sell rating. Nintendo and Sony carry a Zacks #2 Rank,
implying a Buy rating in the short term. Microsoft carries a
Zacks #3 Rank, implying a short-term Hold rating.
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