AMD Earnings Preview, What We’re Watching
Advanced Micro Devices (NYSE:AMD) should report its Q1 2011 earnings on Apr 21. We take this opportunity to take a look at some of the key aspects that investors should watch out for given the spate of news and industry developments that impact chip giants AMD, Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA). Our price estimate for AMD of $8.85 is slightly above the current market price.
In AMD’s earnings, there might be some seasonal impact of lower chip sales. The company indicated during its Q4 2010 earnings that it expects flat or slightly lower sequential revenues in Q1 2011 vs. Q4 2010. [1] While this may be the case, there are several positive trends and factors that investors should be keen to follow.
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Performance of Brazos Platform
AMD stated during its Q4 2010 earnings that its Brazos platform for notebooks has received good demand.
More specifically the company said:
OEM adoption of Brazos is excellent. We shipped more than 1 million Brazos platforms in its debut quarter to world class OEMs including Acer, Asus, Dell, HP, Lenovo, MSI, Samsung, Sony and Toshiba. Brazos’ technical performance is superb, offering a unique combination of ADP HD video and all-day battery life. At CES, Brazos-based notebooks received several significant innovation awards, including Laptop Magazine’s Editor’s Choice Award. [1]
This is especially important because notebooks and netbooks, where the chip is being used, are key a growth area for the PC market and AMD does not have the same position in this market vs. its desktop microprocessors business. Nonetheless, the trend for AMD is encouraging as the market share for the notebook and netbooks market stands at 13.6% compared to 28% for desktops according to our estimates. It will be interesting to see if AMD continues to make gains in this market or if Intel will push it back. If AMD’s success continues, we could raise our forecast for market share gains for AMD.
Will AMD do Better in Servers?
In addition to its notebooks push, AMD is certainly looking to get its position back in the server microprocessor market. AMD’s market share has fallen drastically over past few years and we expect some recovery in 2011. A key component to watch out for will be AMD’s indication regarding server CPU sales as that might give an idea about where its market share is heading.
In addition to the above mentioned points, we will look for guidance or indications on AMD’s margins, which suffered some decline in the last quarter due to 32 nm process technology ramp up. Additionally, it will be interesting to see whether AMD mentions any gains in the quarter as a result of Intel’s hiccup with Sandy Bridge.
You can see our full analysis for AMD’s stock here.