If there is one company that has given Intel (NASDAQ:INTC) a run for its money in the past decade, it is Advanced Micro Devices (NYSE:AMD). The semiconductor maker doesn't just compete in the personal computing space but has steadily expanded its portfolio to contend in several technology segments like gaming and more recently storage.
AMD announced its entry into the storage space with the launch of Radeon R7 Series of Solid State Drives or SSDs specifically built to enhance PC gaming. The computing giant collaborated with Toshiba's storage wing OCZ Solutions to engineer SSDs, which will be available in 120GB, 240GB and 480GB capacities.
SSDs are being touted as the next big thing in technology, which, industry experts believe, will completely replace traditional drives in the near future. The technology does not only significantly reduce boot and loading times but are considered more durable than their rotation-based counterparts. By establishing a presence in the storage sector AMD is looking to further strengthen its hold on the gaming market by becoming a "one stop shop" for aficionados. AMD now boasts products, which range from high-end graphic cards, accelerated processing units, processor chipsets, memory and now SSDs. Acquired from ATI back in 2006, the company's Radeon brand signifies reliability and performance for PC gamers - qualities AMD is looking to bring to its SSDs.
At the moment, the company has no plans to manufacture products for the high-end SSD market, choosing instead to target PC gamers who prefer to build custom gaming rigs and notebook computers for gaming.
AMD Expands Console Market
Intel might be dominant in the personal computing market but it is AMD that leads console gaming. The company's technology powers all fourth generation consoles including big names like Nintendo's Wii U, Microsoft's Xbox One and Sony's PlayStation 4. In addition to its plan to dominate gaming across consoles the company is solidifying its presence in cloud platforms and tablets as well.
Current-generation consoles proved to be a major hit with the masses, which, in turn, drove sales for AMD in the first quarter of 2014. The company collectively shipped 7 million units for both PlayStation 4 and Xbox One in the first quarter - twice as many as their previous iterations had sold in the first quarter of release.
The company anticipates its semi-custom business to expand exponentially as sales of game consoles continue to increase. By growing its product line, AMD's entry into storage will leverage its computing and graphical capabilities to cater to the vast gaming market.
Financial Analysis and Rating
AMD's revenue has grown by 24.1% from the same quarter one year ago, which is significantly higher than the industry average of 9.4%. The growth has bolstered earnings per share as well during the past year. The improvement suggests that the company is doing well and business is gradually surging.
The company's debt-to-equity ratio is significantly higher than the industry average. This indicates that there is high risk associated with organization of debt levels within the corporation. However, quick ratio is quite reasonable at 1.21, which hints at the company's ability to manage short-term liquidity.
Despite doing well in the gaming sector, AMD's stock is considered a "Hold" for the time being. The company may have shown strength in some key areas like strong revenue growth, impressive return on equity and remarkable earnings per share growth, but substantial weaknesses like under par performance when compared to the S&P 500 during the last fiscal year and higher debt management risk diminish its purchase value. Furthermore, it remains to be seen how the company will fare in the storage sector as it faces cutthroat competition from giants like Seagate (NASDAQ:STX), Western Digital (NYSE:WDC) and Toshiba.
Though AMD is making some important strides, it is not quite where Intel currently is. It remains to be seen whether the entry into the storage business will help the company lower its DOE and elevate revenues further. Unless the company makes a significant product announcement in the next few weeks or acquires another technology company, it is advised to hold any buying or selling decisions.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.