AMD (AMD), which has had more lives than most cats, is running out of them, and its last roll of the dice tells investors volumes about the direction of the semiconductor market.
The company's coming embedded processors will be based on ARM Holdings (ARMH) designs, not the x86 Intel-compatible technology the company is known for. Current versions carry an "x" in a corner, representing their X86 compatibility.
The reason is power consumption. An ARM design from AMD may use just 3 watts, against 9-25 watts for x-branded chips. That translates to longer battery life.
Intel (INTC) itself is going through all sorts of trips in an effort to make its new Haswell processors more power-efficient and those chips don't really have much more compute capacity than the Ivy Bridge models they replace. The company is sacrificing performance to minimize energy use and become competitive.
Our Ashraf Eassa insists that Intel is now fully competitive with ARM on power consumption which should save the server market for Intel. But the amount of custom work needed to get there is apparently too much for AMD in the growing embedded chip market.
The reason for that can be seen in AMD's financials. Despite going fabless, and putting its chip-making into the hands of Global Foundries, AMD is still placing more debt on its limited assets. Its debt-to-assets ratio is now well over 50%, more than four times higher than the rate for Intel. That's unsustainable. It is barely breaking even on cash flow, and the value of the stock has gone down 63% in the last year.
If the ARM gambit fails, in other words, the cat dies.
What all this tells me, as a stock buyer, is that Intel is increasingly going-it alone in the processor world, investing heavily in a very few designs and insisting that buyers take off-the-shelf components. But in the device and embedded markets, which are increasingly where the growth is, that won't play. The chip gets designed around the device, rather than the device around the chip.