- A slowing PC market, leadership woes, a manufacturing
glitch and the slow response to rapidly changing consumer needs
led to a 60% decline in AMD's stock price.
- AMD announced a restructuring plan in Q3 2012 which aims
to reduce its expense base by 25% in light of the macro
- AMD introduced industry's first quad-core APUs - Temash and
Kabini - that will add to its revenue streams.
- Strong and improved APU lineup for 2013 - Kabini, Richland,
- Leveraging high growth opportunities in adjacent markets
remains a key startegy; ARM partnership could revive AMD's
- AMD will manage to retain its market share in discrete
The slowing PC market, leadership woes, a manufacturing glitch
and a slow response to rapidly changing consumer needs are some of
the key factors that contributed to an over 60% decline
in AMD's (
) stock price in 2012. Though most of its competitors such
as Intel (
) and Texas Instruments are being hurt by the PC slowdown, AMD
has been the worst hit.
In an effort to strengthen its competitiveness in the market,
AMD announced a restructuring plan in Q3 2012, which aims
to reduce its expense base by 25% in light of the macro
headwinds. As part of the restructuring plan, AMD will cut its
global workforce by 15%, which is estimated to result in
operational savings of $190 million in 2013. With lower
expenses, the company aims to deliver break-even results with
$1.3 billion in revenue and reduce operating expenses to $450
million per quarter by Q3 2013.
In addition to lowering its expense base, the introduction of a
number of new platforms and partnerships in the last few
months could help turnaround AMD's business in the future. In this
article, we take a deeper look at some of these developments.
See our complete analysis for AMD
1. New Tablet Platform Could Open Additional Revenue
Failing to score significant design wins, AMD's earlier efforts
to enter the tablet market have been unsuccessful. Its first two
tablet chips, including last year's Hondo and Z-01 tablet chip
failed to make an impact in the market. Earlier this year, AMD
introduced its Temash platform that targets the fast growing
performance tablets and hybrid markets. AMD claims that the
new processor offers 100% higher graphics processing performance
compared to its predecessor, the Hondo chip.
Temash will be industry's first quad-core x86 SoCs, though it
will be available in both dual and quad-core variants. It offers
a longer battery life and is specifically targeted at high
performance tablets that can run full HD games and productivity
applications. APUs based on the Temash platform also support the
Turbo Dock technology. The Turbo Dock technology automatically
adjusts AMD's APU performance when a hybrid PC/convertible is
docked, and the device is being used for complex tasks such as
content creation. On the other hand, the Turbo Dock lowers power
consumption when in tablet mode.
IDC research shows that speed and high resolution display are
two key features that tablet users are concerned about.
By saving battery life, the Turbo Dock extends video watching and
web browsing time on devices. Temash-based performance tablets and
hybrid notebooks will be available in the market later this
We believe that AMD's growing focus on the mobile computing
market will have a minimal impact on turning around the stock price
as it has a long way to go before it can effectively compete with
Intel and established ARM players in the tablet market.
Nevertheless, its mobile computing strategies are could provide an
additional revenue stream for AMD. We estimate Temash's target
market to reach 29 million by 2016. (Read:
AMD's Entry Into Tablets Will Not Help Its
2. Strong APU Line-up Could Accelerate Product
With the increasing popularity of notebooks, the PC industry is
shifting toward lighter and thinner form factors. Though PC
shipments remained flat this year, research firm IDC estimates
shipments to grow on an average of around 7% from 2013-2016.
AMD has a robust pipeline of upcoming platforms which could fuel
demand for its products in 2013 and beyond. At the 2013 Consumer
Electronics Show in January, it introduced the Kabini platform,
meant for ultrathin notebooks in the low power segment. Kabini will
be AMD's first quad-core APU and will replace its Brazos 2.0
Earlier this year AMD also introduced a new APU, code named
Richland, which target the desktop and performance ultrathin
segments. AMD claims that the Richland platform delivers over
20%-40% better visual performance compared to its predecessor,
the Trinity chip. Despite its declining sales, AMD's Trinity
notebooks marked a 70% sequential increase in unit shipments and
accounted for one third of its total notebook shipments in Q3
2012. We feel that the introduction of higher efficiency processors
by AMD could lead to additional design wins, helping the company
maintain its market share in the coming years.
The follow-up to Richland - Kaveri, is also expected to start
shipping in the second half of 2013, and promises to offer
significant performance per watt improvement and a stronger battery
life, offering higher efficiency.
3. Collaboration With ARM To Revive AMD's Server
AMD is in the process of designing ARM technology based
processors in addition to its x86 processors for multiple markets,
starting with cloud and data center servers. The new generation
server products will start production in 2014. The collaboration
with ARM will make AMD the only processor provider to bridge the
x86 and 64-bit ARM ecosystems.
On the flip side, the wide timeline leaves an opportunity for
AMD's competitors to retaliate, which might negate any potential
advantage that AMD could have. However, AMD claims that its suite
of processor and graphics IP, third-party processor cores and
SeaMicro's innovative supercomputer fabric will enable it to
deliver differentiated solutions.
Additionally, certain ARM players such as Nvidia are developing
ARM-based chips for servers and plan to enter the market in the
near future. Nevertheless, collaborating with ARM Holdings could
give AMD an edge as, unlike other ARM-based players; it already has
certain expertise in the market.
4. Leveraging High-Growth Opportunities In Adjacent
AMD aims to diversify itself beyond the PC market and target
other adjacent markets including dense servers, new embedded
markets and new lower-power form factors where its IP provides
differentiation and a better opportunity for it to grow its share.
The company intends to drive 40% to 50% of its portfolio to these
faster growing markets in the future.
AMD intends to combine its extensive 64 bit design experience
X86 processor IP and ARM processor cores with the SeaMicro offering
to leverage the increasing transition to dense servers.
AMD is focusing on increasing its share in additional embedded
markets including communication, industrial and gaming among
others. It intends to leverage the success of its APUs and graphics
to tap the growing potential in such markets. AMD aims to increase
the revenue contribution from its embedded business to almost 20%
by 2014, from the current level of a mere 5%. It scored significant
design wins last quarter and claims to be in line to achieve its
5. Stable GPU Business Will Help Retain Market Share
Nvidia continues to account for a dominant share of the discrete
GPU market, though its lead is significantly less when compared to
Intel's lead over AMD in the PC microprocessor market. In 2012,
Nvidia gained some market share from AMD in the discrete
graphics add-on market for PCs. While Nvidia might have the
upper hand in the GPU market right now, we believe the stiff
competition between the two will make any significant market share
gain by either, unsustainable in the long run.
AMD released a full line of mobile discrete graphics to market
recently, apart from recapturing the graphic performance leadership
position with the launch of the world's fastest GPU. It also
announced a new series of discrete graphics processors for
performance gaming earlier this year. The new product portfolio
aims to target high growth markets such as ultrathins, convertibles
Our price estimate of $3.15 for AMD
is at a 30% premium to the current market price.
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