AMD Introduces New Mobile APUs, Slashes Price Of Exisiting Ones To Gain ...

Summary AMD announces new mobile APUs designed as complete solutions for gaming, productivity applications and ultra high-definition 4K experiences. AMD continues to struggle in the Computing and Graphics business due to ongoing weakness in the consumer PC market. We believe in the company's long-term growth potential, reflected in our price estimate of $4.12, which represents a more than 50% premium to the current market price.

This week, AMD (NYSE: AMD) announced the addition of its first high performance system-on-chip ((SoC)), code-named Carrizo, and a mainstream SoC code-named 'Carrizo-L' as part of its 2015 Mobile APU family roadmap. The company claims that the new mobile APUs are designed as complete solutions for gaming, productivity applications and ultra high-definition 4K experiences.


The Carrizo processor will integrate the new x86 CPU core code-named 'Excavator' with next generation AMD Radeon graphics in the world's first Heterogeneous Systems Architecture (HSA) 1.0 compliant SoC. The 2015 AMD Mobile APU family simplifies partner designs across a broad range of commercial and consumer mobile systems. The APUs are scheduled to ship in the first half of 2015, with laptop and all-in-one systems based on the same selling in the market by mid-year 2015. The 2015 AMD Mobile APU family simplifies partner designs across a broad range of commercial and consumer mobile systems.


AMD continues to struggle in the Computing and Graphics business due to ongoing weakness in the consumer PC market. It reported a 15.6% annual decline in revenues from the division in Q3 2014. The company lost some market share to Intel (NASDAQ: INTC) in the quarter, since the latter reported strong growth in PCs despite a relatively flat PC market. In Q2 2014, Intel accounted for 94.7% of the revenue in the PC processor market while AMD accounted for just 5.2%, according to research firm IDC. Intel's chips powered 84% of desktop units shipped and 88% of laptops in the quarter. Intel has been the leader in the PC microprocessor market for almost two decades. AMD had a strong position in the low-cost processor market, but over the years Intel has increased its focus in the segment, in-line with the growing demand for low-cost PCs, a trend that has impacted AMD's competitiveness in the market.


According to a recent media report, AMD plans to lower the prices of its A-series Kaveri APUs to make them more competitive and fight back some market share from Intel before the end of this year. Additionally, AMD intends to discontinue the A10-7700K chip in order to boost demand for its more expensive products.


Our price estimate of $4.12 for AMD is at a more than 50% premium to the current market price, and we believe in the company's long-term growth potential. (Read: Here's Why We Believe AMD Is Worth $4)


AMD Focuses On Improving The Financial Performance Of Its Computing & Graphics Business

Though AMD has significantly lowered its dependence on PCs, it continues to derive a considerable portion of its revenue from the segment. Earlier this year, AMD laid out several important objectives to improve the financial performance of its Computing and Graphics business, which include: 1) expanding in the commercial client market; 2) improving its mix in consumer notebooks; 3) gaining share in professional graphics; and, 4) and increasing component and AIB (i.e., Add-In Board) channel sales.


The company believes that its increasing focus on the commercial PC segment will help it improve its performance in this segment. AMD has a larger presence in the consumer PC segment, which still remains weak. AMD launched its Pro A-Series APU in Q2 2014 and claims to have met its goal to double the number of AMD-based commercial client design wins from last year, in Q3 2014. New commercial client offerings from Dell, HP, Lenovo have started ramping, resulting in approximately a 50% sequential increase in AMD's commercial APU shipments.


AMD also claims to have improved its notebook APU mix in Q3 2014, as its Kaveri processors ramped in mobile design wins and its higher-end mobile processor unit shipments increased nearly 50% sequentially. Mobile discrete GPU unit shipments also increased as new design wins entered production. Last month, Apple (NASDAQ: AAPL) announced a number of new iMacs powered by AMDs Radeon GPUs, a trend that AMD believes will play well to its strengths in discrete GPUs.


Although AMD managed to increase (sequentially) its desktop processor unit shipments in Q3 2014, its performance in the component and graphics channel was weak. It witnessed slowing sell-out momentum, particularly in China, and believed there was some downstream inventory build in the quarter, causing distributors to be more cautious in managing their inventories. Nevertheless, AMD remains committed to this market and has started taking actions in conjunction with its channel partners to improve sell-through in the coming quarters.


Disclosure: None


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