AMD’s new marketing strategy shifts focus to graphics business; server business remains most important
A recent article in the NY Times highlights a shift in AMD’s consumer marketing strategy to emphasize the capabilities of its graphics processors over traditional consumer notebook and desktop PC processor metrics such as GHz and cache size. AMD, which makes money by selling desktop, notebook and server processors to PC makers like Dell, HP and Toshiba entered the graphics business through its acquisition of ATI in 2006.
Graphics processors are becoming increasingly important as PC user demand for video games and HD video continues to rise. Displaying PC graphics is a computationally intensive task which is assigned to graphics processors to avoid overburdening main PC processors. Most graphics processors are sold directly to PC makers although high-end graphics processors are also sold (primarily to gaming enthusiasts) through retailers such as Best Buy.
AMD’s marketing strategy shift reflects the company’s struggle to capture additional market share from Intel within the notebook and desktop PC processor market as well as the growing significance of graphics processors. Within AMD’s content on our platform, you can see how Graphics Processors constitutes 16% of the $3.23 per share Trefis estimate for AMD’s stock. In comparison, the Desktop Processors and Notebook Processors businesses constitute only 13% and 7% respectively.
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Despite the importance of AMD’s graphics business, AMD’s stock is most impacted by its Server Processor business (constituting 60% of the Trefis price) where savvy IT customers (rather than consumers) are the primary buyers of AMD’s products and are marketed to differently (greater emphasis on price / performance). AMD’s new marketing strategy affects only its consumer business (graphics processors and notebook/desktop PC processors).
AMD server processor market share increased from about 5% in 2003 to about 31% today due to the company’s ability to capitalize on stumbles by Intel within the server processor market. On our platform, you can see how Server Processor Market Share is the most important driver of AMD’s stock.