AMD: A Company In Transition, But Still Dependent On PC

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AMD's earnings beat estimates as the company makes good on its promise to transition away from the fading PC business toward game consoles and other emerging markets such as microservers. AMD's revenue was up 15 percent to $1.46 billion for the third quarter of 2013 from $1.27 billion the prior year.

As expected, AMD's biggest hit came from its declining PC chip sales that were down 6 percent. The chip maker's game console business helped take up the slack, reporting fast growth supplying chips for Sony's PlayStation 4 and Microsoft's Xbox One game consoles.

"Two years ago, 90 to 95 percent of our business centered around PCs," said CEO Rory Read in a statement. "We see it as an important business, but times are changing."

[Related: Gartner Says PC Slump Continues: The Top Winners And Losers?]

As PC sales have declined 8.6 percent compared to the year prior, according to Gartner, AMD has worked hard to shake its image as just an Intel alternative. But that hasn't led to a complete departure from the PC space or competing with Intel.

Hewlett-Packard, Samsung and Toshiba each have announced new 2-in-1 PCs based on the 2013 AMD Elite Mobility APU, an x86 system-on-a-chip (SoC) designed for tablets. AMD also has left the door open to compete with Intel in the PC space with its upcoming computer SoC chip Kaveri, scheduled to ship 2014.

Intel and AMD also will still compete in the emerging microserver market. As part of its acquisition of SeaMicro, AMD offers low-power and high-density microservers. HP (Project Moonshot) and IBM both have microserver offerings that run on a mix of Intel and ARM processors.

Earlier this month, Verizon announced that its high-performance public cloud would be powered by AMD's SeaMicro SM15000. According to market researchers at MarketsandMarkets, microservers account for 2.3 percent of the market.

Despite PC client launches, Read says, AMD is not betting on the PC. He estimates PC sales will drop 10 percent this year and next.

"We are in the middle of a multiyear journey to redefine AMD as a leader across a more diverse set of growth markets," Read said. According to AMD, it generates 80 percent of its revenue from the PC industry. Reid hopes in the coming year AMD graphics chips will represent 50 percent of its revenue mix.

Another market in which AMD will continue to compete with Intel is PC graphic chips. According to IDC, AMD owns about a third of the market, with the balance going to Nvidia. But, it's AMD's commitment to the game console with graphics chips that will see the most promising growth, Read said.

Intel on Tuesday reported a drop in revenue directly related to a drag in the company's PC and client business. Intel reported its PC chip division saw third-quarter sales drop of 3.5 percent from a year earlier.


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