AMD closes near session lows; bears focus on PC share losses, margins

After gradually rising in the week going into its Q3 report, AMD (AMD -13.4%) more than gave back its gains, in spite of beating estimates and issuing above-consensus Q4 guidance.

While sell-side bulls trumpeted AMD's Xbox One/PS4 ramps and the strength of certain other businesses (SeaMicro, workstation GPUs), bears focused on weak PC CPU numbers and commentary (particularly for notebooks), as well as recent gross margin declines.

Goldman (Sell) sees AMD continuing to lose ground to Intel (INTC -0.2%), which has gained notebook share this year with the help of its low-power Haswell parts, and only saw a 3% Y/Y drop in PC CPU division sales in Q3 (vs. 15% for AMD). The firm thinks AMD has ceded 300 bps of share to Intel since Q1 2012. The arrival of Intel's Bay Trail Atom CPUs could further pressure AMD on the low-end; AMD is countering with Temash.

BofA/Merrill, which cut shares to Neutral, is worried PC weakness is going to offset console-related growth. CEO Rory Read predicted on the CC PC shipments will be down 10% both this year and next (IDC/Gartner aren't quite as pessimistic for 2014).

Wedbush (Outperform), on the other hand, thinks bad news is priced in, and estimates console-related sales surged to $401M in Q3, or 28% of revenue.

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Comments (9)
  • Bluismycat
    , contributor
    Comments (75) | Send Message
    I just don't understand!?! AMD have deliberately focused on moving away from direct competition with INTC which I might add is the only intelligent thing they could have done. So, why are they being beaten up now? The earnings was, in general good! Wasn't it? So what is happening here?
    Someone with a bit more brains than me, please??? Help me understand???!!???
    18 Oct 2013, 06:44 PM Reply Like
  • RWMostow
    , contributor
    Comments (1691) | Send Message


    I for one do not have more brains than you. However, if I had faith in AMD's future being profitable, along with both price appreciation and divi growth, then a 13% pullback is a buying opportunity, isn't it?


    Long: INTC


    18 Oct 2013, 08:25 PM Reply Like
  • sharke
    , contributor
    Comments (35) | Send Message
    not much brains here. am shocked how the market behaved! might be a good opportunity to buy all the way till 3!
    18 Oct 2013, 09:33 PM Reply Like
  • Stock Market Mike
    , contributor
    Comments (3741) | Send Message
    You have to remember that about 9/10 investors investing in a tech company like AMD...


    1) Do not understand technology.
    2) Do not bother to listen to the conference calls and plans - they just follow buy and sell signals. (Listening to advisors or analysts)


    I get the feeling 9/10ths of the market still does not understand how the console margins contribute to the bottom line, or what AMD's diversification and growth strategy really is. They do not understand the cloud, or how well positioned AMD is. I don't see them dethroning Intel anywhere, but they can certainly chip away enough to return to strong profitability. I look forward to AMD's first $0.20 EPS quarter, some unknown time in the future. (Probably not 2014; later. 2015 or 2016.)
    18 Oct 2013, 10:05 PM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (9733) | Send Message
    ". I don't see them dethroning Intel anywhere, but they can certainly chip away enough to return to strong profitability. "


    Yeah, that's what AMD bulls have been saying for a while. Intel took *even more* market share. Bay Trail-M will only make it worse.
    20 Oct 2013, 03:11 AM Reply Like
  • User 7757181
    , contributor
    Comments (43) | Send Message
    Well, just look at the numbers! The console business currently delivers 30% of AMDs revenue. The console business has about 15% gross margins, which is horrible. In addition, AMD predicted that revenue growth next quarter will be in the single digits. With that, you can easily calculate what the console business will add as profits for next quarter. i can tell you: It's not enough for the current share price. In addition, you get the high risk of further slumping PC and graphics sales and the threat of Intels Bay Trail in the cheap devices area, AMDs only market that is left.


    Samsung just released an AMD based Ultrabook - they even didn't put an AMD sticker on it (only a quad core sticker) to not emberrass their customers. A horrible sign.


    I sold my AMD shares early yesterday and that was a good decision. The console hype is over, AMD will continue to slump.
    19 Oct 2013, 05:28 AM Reply Like
  • toonies
    , contributor
    Comments (447) | Send Message
    15% operational margin. It is big difference. And it is very good btw.
    Revenue increase in q4 is more than was WS estimate. If you know to add two numers together, you can calculate 2H revenue increase against 1H.
    But we will see who is right later.
    19 Oct 2013, 07:32 AM Reply Like
  • JLivermoore
    , contributor
    Comment (1) | Send Message
    AMD has decided to go fabless. The revs are back to a Level not seen during the last five years and they are back to profitability. It seems they found the right path to follow. For sure AMD must keep an eye on gross margin. To me this company could easily make 1,5-2 US$ p. Share p. a. within the next three yrs. Price target $ 12-14.
    20 Oct 2013, 11:49 PM Reply Like
  • mikelazar
    , contributor
    Comments (438) | Send Message
    I don,t know about you but, Apple is using 2 of their chips in it,s new apple tower.And if that isn,t a vote of confidence in their product line, Than nothing is.i,m long AMD.
    25 Nov 2013, 07:16 PM Reply Like
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