Here's my opinion.
I consider AMD a Hold at the moment, there's clearly some players trying to get the value lower only to load up on it.. I can see AMD hitting 3.50 but not past that. The fact is the interest for the new consoles is greater than the last generation of consoles, It's true that margins are less than expected but with the kind of volume we'll see from both consoles I think AMD will be sitting pretty in the next year. I see it around 4.50-5.50 later this year and possibly 6+ in 2014. I don't expect 10+ until either A) the pc market gains in moment or B) their mobile efforts succeed.
Now don't even mention how the mobile market is winning and nobody is gaming on consoles anymore, that is simply not true.. I agree that that market has expanded in the last few years but dedicated mobile gaming devices have been around for almost 3 decades and consoles have always been more popular.
Gaming on a mobile phone isn't something very pleasant, a few games make use of the device specialized controls but most games are not designed for a touch screen, most mobile gamers also don't have specialized accessories like controllers. I think people overestimate the market because of the number of gaming capable devices out there. The fact is that gamers will go where the games are and that's the xbox one and ps4.
I don't think we have to worry about the consoles
PC gaming is a different story, for the past few years analysts have been calling for it's demise.. I don't believe it will die and I actually see it making gains in the next year. I think the problem with PC gaming is a matter of perceptions, people see the initial investment costs of PC gaming as a major hurdle. I think there's some truth to that considering the miniscule margins consoles make to later recuperate on software sales.. but you can still build a very capable gaming pc for a reasonable amount and I believe that AMD will offer great value with their APUs.
"nobody is gaming on consoles anymore"
Nobody said that. But AMD, and all these prattling pumpers, are planning on closed-source console gaming to be as dominant as it once was, and that is just not going to happen ever again. The fact that AMD was able to win all three major closed-source console designs should be a clue to you that there just aren't significant profits to be spread around any more.
"Gaming on a mobile phone isn't something very pleasant."
Are you completely mad? People are gaming on their phones by the hundreds of millions, and are thrilled and even obsessed by it.
"you can still build a very capable gaming pc for a reasonable amount"
You can build a gaming PC with a large margin of performance advantage on any existing or planned console for about the price of the most expensive console. And if you're loaded, you can build a gaming PC that makes any of these new consoles look like a calculator watch. Consoles have lost their main early-adopter market. Some early-adopter types with killer PC rigs will buy the consoles for the novelty (and because they buy everything), but they won't be as impressed as before, and won't be posting gushing reviews as they once did, and that will hurt the other early-adopter sales, and that will slow followon sales.
It doesn't take a total cratering of the console market to crater AMD. AMD lives and dies in the margins, and when OEM sales start to flag a little, they'll be demanding AMD take a price cut and deliver in lower volumes. Given how much AMD has staked on this (only its ability to pay for ARM development, and thus its entire survival), it's certain that AMD will be in for depressing times ahead.
I don't care if there are hundreds of millions of mobile gamers, the core gamer market is very much alive. I think you suffer from a case of the grass being greener on the other side. Mobile games and console/pc games are completely different animals and so is their target audience.
and I don't know why you bring up this 'closed-source console' like it even matters.. how well is the ouya doing? nobody bought it to play android games on it.. they all wanted to play emulated roms with it, people will go where the big games are and that's on the consoles.. and eventually PCs..
with AMD present in the major consoles you can bet that the upcoming steam boxes will feature AMD APUs.
All the news I've read coming from Industry leaders has been very positive on the subject of public interest in these new consoles. Just read this quote from the Ubisoft CEO
"Some retailers, not all of them, are saying pre-orders two times than what they saw in the last generation launch," said Guillemot. "They're getting more pre-orders than what they saw before." In turn, Ubisoft representatives expect, by this Christmas, for next-gen consoles to have double the user base of the previous generation at the same time in its life cycle. Guillemot was also happy to note that Ubisoft products, including Watch Dogs and Assassin's Creed IV are among the "top five for most pre-ordered games" for next-gen consoles"
The fact is results and guidance beat. The margins were lower for the graphics chips for the consoles but so what? How do we know they won't improve as time goes on and they perfect the process? What if Rory is sandbagging the numbers?
The console wins stabilizes AMD for the foreseeable future. Its steady income and profit for years ahead. How is this bad? As a matter of fact I think this puts any chance of bankruptcy off the table. Now if AMD can keep costs down and enter new markets and take some share away from Intel then look out,
Bottom line this is a risk/reward play. If they don't execute AMD will be dead money for quite awhile. If they execute a little, you'll still see gains and if they execute a lot, then look out.
At 3.60 a share with a stable business in consoles and cost cutting and a new strategy, it seems to me a lot more upside than downside.
Shorts should not be greedy and longs should be thinking of adding or at least not being scared out of their position. 3.60 is way to cheap to sell.
Excellent post, steve! No pump or trash, just a mature and logical take on AMD for it's current situation. If people disagree with your post, it's only because they *hate* AMD REGARDLESS of what they achieve and we got plenty of those here with same old stupid smut. Period.
I don't think anyone is "keeping this down." The market expected to see advance results of the graphics/gaming end that weren't there. If AMD can execute over next quarters, things will look up. But sadly, this is a big "if." For the record, I have a very small holding in AMD that is for me, a speculative play.
Explain what was so bad about the conference call? I guess you heard something different, because to me they are improving and are talking about profitability going forward. Are those the things "that weren't there"???
It's clear people got very excited and tried to load up before the earnings, I held through, which I should not have but I Got my shares under $4.00. Investors recoiled after the downgrades, which were kind of uncalled for in my opinion.
I think people are trying to drive this down before mid-september comes along.. I'm sitting on my shares and waiting for the next earnings, I doubt I'll be holding this time.. next Q, possibly.. when the picture will be clearer.