twinmill's  Instablog

Send Message
College student and New investor. So far I have focused on researching and purchasing various technology socks. I am long SPIL and long AMD
  • AMD: Grasping The Preorder Numbers On The PS4 And Xbox One And Potential They Show 4 comments
    Sep 11, 2013 8:16 AM | about stocks: AMD, SNE, MSFT

    As we all know their has been much anticipation regarding the up coming release of the new Xbox One and Playstation 4.

    A company that is sure to benefit from the release of both consoles is AMD: Advanced Micro Devices.

    Over the past few months I have read multiple articles regarding predictions of whether or not the Xbox One and Playstation 4 will be successful gaming consoles or epic fails.

    Many investors purely look at the contents of this new generation of consoles and believe that these specs are not different enough from current generations to make the consumer want to go out and buy them.

    I, a devoted gamer have my own opinion and statistics on why I believe that sales of these consoles will shock everyone. Browsing around the internet lately I have came across physical number's of the preorders sold for certain games coming out on Microsoft's Xbox One (NASDAQ:MSFT) and Sony's Playstation 4 (NYSE:SNE). These numbers do not prove the numbers of consoles preorderd but do give a suggestion to at least how many have been sold.

    The information I am providing was pulled from Vg's is a website that supplies preorder numbers for games that have been announced and are upcoming releases. Lets take a look at these numbers.

    Current Preorder #'s for Games the week ending September 7th.
    Title of game: Total # Preordered Weekly Change
    Battlefield 4 (PS4) 251,166 1,873
    Call of Duty: Ghosts (PS4) 249,624 4,829
    Call of Duty: Ghosts (Xbox One) 242,246 6,465
    Killzone: Shadow Fall (PS4) 226,257 2,303
    Assasin's Creed IV: Black Flag (PS4) 166,396 3,079
    Battlefield 4 (Xbox One) 129,654 1,935

    What I have done is provided you, the reader with data that we can use to begin to draw conclusions on roughly how many next generation consoles have been preordered.

    We will assume that since 251,166 copies of Battlefield (PS4)have been preordered that this means at least the same number of Playstation 4's have been preordered.

    Their has been much speculation regarding the true revenue/margins that AMD will make off of these new consoles. To get an estimate I will use the above numbers to predict the $$$ AMD will make off the launch of the ps4 and Xbox one

    In the first equation we will assume that AMD is making 50$'s in revenue and 10$'s margin per console for both the Xbox One and Playstation 4.

    equation 1 PS4: 251,166 x 50.00's= Is a guaranteed $12,558,300 increase in revenue and a increase of $2,511,660 profit on the Playstation 4 alone. This is also assuming that the # of people who ordered battlefield 4 also preorder every other game. In reality I would estimate the true # of gamer preorders to be around 400,000 at this point with 10 weeks until launch. This 400,000 figure also does not include those resellers who purchased the console but did not preorder games. From having prior experience working the Kinect launch and Wii-U launch. I would predict that for every 1 console sold to a true customer that their is another one sold to a person who only intends to sell it.

    If we predict a 100,000 ps4 consoles have been preordered by people who did not also order a game then we can create a new equation

    For this equation well assume 500,000 ps4's have been preordered at this point.

    so we get. 500,000 x $50 ='s $25,000,000 in q3 revenue increase and we get 500,000 x $10 ='s a 5,000,000 increase in margin. These numbers may seem low to some investors but note that these numbers come from assuming AMD is making low rev and margin per chip. It also does not factor in consoles sold to people who have not preordered. If the ps4 sells 2 regular consoles for every one preordred then we would be looking at numbers triple what I provided. Also consider what if AMD is actually making closer to $100's per chip and 30$'s in margin. I do agree this is a long shot however no one truly knows yet the amount of money AMD is making per chip.

    Now lets look at the Xbox One assuming that reports are correct and the ps4 is still outpacing the Xbox in preorders. Well figure the Xbox one has done 330,000 preorders. 242,000 would be a appropriate number of guaranteed sold based off of the # Xbox One game preorders and an extra 90,000 suggested by factoring in resellers and those who did not preorder games

    330,000 x 50 = 16,500,000$'s in revenue and 330,000 x 10 = 3,300,000 in margin

    Lets also assume a 2:1 preorder/ sell ratio for the release of both consoles

    1) PS4 = 25$ x 3 = $75 million in revenue increase and a $15 mil increase in margin

    2) Xbox One = 16.5$ x 3 = 49.5 million in revenue increase as a worst case scenario for q3 AMD and a increase of 10 million in margin. Once again I am supplying low ball numbers as a worst case scenario.

    Now that we have predicted total numbers for consoles. It is looking like a worst case scenario ($50 rev per chip, 10$ margin) would have AMD increase in revenue of $125 million and 25 million margin or a best case scenario ($100 rev per chip, $30 margin) or earning $250 million revenue in q3 and 75 million in margin from the combined sells of the PS4 and Xbox One.

    Judging by the numbers provided above it does look like the next generation of consoles will succeed. Sales from console chips alone will not pull AMD out of hot water. They will however provide an extra cushion and give AMD the time to hopefully gains wins in the other areas such as servers and mobile chips.

    Disclosure: I am long AMD.

    Stocks: AMD, SNE, MSFT
Back To twinmill's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (4)
Track new comments
  • sharikou
    , contributor
    Comments (64) | Send Message
    Only one company on the planet can provide the core technologies used in Xbox One and PS4 alone: AMD. No one else, not a single company on the whole surface of the earth has the the necessary Intellectual Property to do it.


    Microsoft and SONY chose AMD not because they loved Intel or Nvidia less, but because only AMD has it.


    The consumers will soon notice this crucial fact: only AMD has the know-how to make the core PS4 and Xbox One possible on a single piece of silicon.
    16 Sep 2013, 02:25 AM Reply Like
  • twinmill
    , contributor
    Comments (7) | Send Message
    Author’s reply » I agree with you. Also its important to remember a lot of gamers prefer amd to nividia price performance and reliability wise.
    16 Sep 2013, 08:44 PM Reply Like
  • Arvinpinal
    , contributor
    Comments (519) | Send Message
    not bad.. base on today's news !
    Sony PS4 sold million units within 24 hours..


    PS: FYI -- next month, Microsoft Xbox One will also launch to market and as previous article mentioned it is around $3 billion deal.


    I am long AMD share and recently add more .. See you at $6 range
    18 Nov 2013, 01:18 AM Reply Like
  • twinmill
    , contributor
    Comments (7) | Send Message
    Author’s reply » Well I work for and electronics store. We got over 300 ps4s. On launch and we have over 300 xbox ones. Their selling like hot cakes. At least for now. I won't lie tho I have seen a few with the hdmi output error. I'd bet that between the two consoles our stores sales would probably be 800+ before black friday
    18 Nov 2013, 08:56 AM Reply Like
Full index of posts »
Latest Followers


  • Why Isn't Ford (Forward industries) going up? They had a great quarter from what I saw?
    May 14, 2013
More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.