Advanced Micro Devices a major player in this industry.
Can Advanced Micro Devices Survive The Declining PC Market?
Sep 27 2013, 09:21 | 22 comments | about: AMD, includes: MSFT, NVDA, SNE BOOKMARK / READ LATER
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Advanced Micro Devices (AMD) is an important player in the microprocessor market and has been facing headwinds from the major personal computer, or PC, market due to decline in demand for notebooks and desktops. To reduce the negative impact of this decline, the company is increasing its product offering in non-PC markets, resulting in development of chips for servers and gaming consoles, and it recently entered the tablet market. These market segments have opened new revenue growth avenues for the company, and it is important for Advanced Micro Devices to capitalize on growth in these market segments in order to generate good value for investors.
Play and win revenue growth
The video gaming industry is becoming an important market segment for Advanced Micro Devices. This market provides an opportunity for the company to move away from the declining PC market. According to IDC, second quarter PC shipments declined 11.4% year over year. This slump was because of the growing demand for tablets, which are overtaking the PC market. The company is expected to offset this negative trend in the PC market with growth in game console chips. The upcoming Microsoft (MSFT) Xbox One and Sony (SNE) PlayStation 4, or PS4, will both feature Advanced Micro Devices' custom x86 based CPU architecture, also called System on a chip, or SOC. This type of CPU architecture is used to combine all available features of a computer on a single chip, ranging from audio to graphics. This type of technology is used in compact devices like smartphones since it takes less space and reduces power consumption.
Microsoft used Advanced Micro Devices' CPU and graphical processing unit architecture, or GPU, in its earlier gaming console, Xbox 360. However, Sony was using its own CELL processor and Nvidia's (NVDA) graphics chips in its earlier console model, but it decided to use Advanced Micro Devices' products for the first time in the PS4. Nintendo's Wii U gaming console, which launched last year, is also using Advanced Micro Devices' GPU. Having its processor in all three major gaming consoles makes Advanced Micro Devices a major player in this industry.