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Can The New Product Lineup Help AMD Regain Its Share in PC Processors?

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The year 2015 was a challenging one for graphics processor manufacturer AMD , with the company’s revenue base declining by 28% and its net loss expanding to $660 million, compared to $403 million in 2014. In addition to weak macroeconomic conditions and declining PC sales, AMD was hit by significant market share loss to Intel in APUs (i.e., Accelerated Processing Units) and Nvidia in GPUs (Graphics Processing Units).

Notwithstanding a tough PC market and financial losses, AMD continued its multi-year effort to transition its business model by diversifying its revenue base and establishing a foundation for improved financial performance. The company is confident that its long term technology investments and sharpened focus have created a strong foundation for future growth. It expects revenue to grow in fiscal 2016, and believes that regaining share in the client compute market, driven by expansion in the commercial segment and a competitive product roadmap, will be an important growth driver for fiscal 2016.

Earlier this week, AMD announced the increasing momentum for the 6th Generation AMD Pro A-series mobile processors, based on the introduction of two new HP notebook design wins, new large-scale enterprise deployments, and the expansion of HP adoption of AMD FreeSync™ technology in its notebooks and displays. (Read Press Release) Launched last year, AMD PRO A-Series processors efficiently integrate extensive AMD CPU, graphics, security, and video processing IP into a single SoC design. So far, the company claims to be seeing a positive consumer and commercial response to the new APUs.

AMD actually managed to make some progress in stabilizing its Computing and Graphics businesses (despite the continuing decline in PCs), and achieved 2% revenue growth in the second half of 2015 compared to the first half of the year. In Q4 2015, the company delivered its third consecutive quarter of sequential revenue growth in the channel and further reduced downstream product inventories based on improved demand for FX CPUs and A-Series APUs.

AMD has lost significant market share to Intel in the last few years (see graph below). Whether the new improved product lineup will help the company regain share in the PC process market is yet to be seen. We forecast AMD’s PC processor market share to increase marginally over our review period. Toward the end of 2016, AMD plans to launch the first CPUs based on its new Zen microarchitecture. In terms of single thread performance, AMD’s Bulldozer architecture fell short of Intel products by a wide margin. AMD has stated that Zen will bring a 40% improvement in instructions per cycle, a measure of single-threaded performance, compared to Excavator, the latest revision of the Bulldozer architecture. This could improve AMD’s competitiveness in the PC market.

Source: PassMark Software

Our price estimate of $2.25 for AMD is at a 20% premium to the current market price.

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