Seeking Alpha
Research analyst, long/short equity, tech
Profile| Send Message|
( followers)

Advanced Micro Devices (NYSE:AMD) is now hiring Android driver development engineers, which shows that the company is clearly looking to make a significant push into mobile computing. It will not only compete against ARM-based mobile chip producers like Nvidia (NASDAQ:NVDA), but also against its arch rival Intel (NASDAQ:INTC) which is making its own push with Atom processors. Below we discuss what AMD is doing and what could be potential upside to it, given it gets reasonable success.

Our price estimate for AMD stands at $8.85, which is slightly above the current market price.

Hiring of Android Developers

AMD seems to have begun the process of making its chips compatible with Android software. This indication comes from the fact that the company has started hiring staff in order to develop Android drivers for its chips. It is well known fact that android is one of the leading operating systems for mobile devices like smartphones & tablets and AMD surely wants to get into this space given its high growth.

Xbit Labs states that:

AMD is currently looking for Android driver development engineers to help it evolve its Linux driver stack for new platforms and “in line with the development trends in the Android ecosystem.” In particular, AMD wants the candidate(s) to have experience with video decode acceleration within the Android web browser or video player application. Additionally, AMD is searching for an Android/MIPI driver architect, who will bring up driver development and qualification on new hardware platforms among other things. [1]

Brazos Platform Hold Promise

AMD’s Brazos platform for mobile devices could well challenge Intel’s Atom in netbooks. According to an article on AnandTech, Brazos chip seems to be doing better than Atom in terms of graphic performance as well as heating. [2] Also, given the fact that the chip is smaller than Intel’s Atom processor, AMD can have significant price advantage and thus challenge Intel. [2]

Looking at Upside

To see the potential upside for AMD from its push into the mobile market, let’s look at what Atom does for Intel. We estimate that Atom constitutes about 2.8% to estimated $155 billion value for Intel. This puts Atom’s value at around $4.3 billion. If AMD can create even half of this value for itself from some success in mobile computing market (netbooks, smartphones, tablets etc.), it could lead to an upside of as much as 30% to its current price estimate. It must be noted that our current model for AMD does not incorporate mobile computing devices yet because of AMD’s little presence in this market as of now. We’ll be updating the model soon as we get more information on AMD’s sales in this channel.

See the current $8.85 Trefis price estimate for AMD.

Notes:

  1. AMD Initiates Work on Android Platform: Looking for Android Developers., Xbit Labs, Apr 6 2011
  2. AMD’s Brazos vs. Atom Thermals, Revisited, AnandTech, Jan 14 2011
Disclosure: No positions
Source: Advanced Micro Devices Eyes Android Platform