Apple (NASDAQ:AAPL) has used AMD’s (NASDAQ:AMD) dual FirePro professional graphics solutions in its recently launched Mac Pro desktop. With AMD’s FirePro™ D300, D500 and D700 GPUs, Mac Pro users will have the ability to seamlessly edit full-resolution 4K video and simultaneously render effects in the background, and still have enough performance to power up to three high-resolution 4K displays. The dual AMD FirePro GPU options for Mac Pro feature up to 6GB of VRAM and up to 2048 stream processors per GPU, matched with top configurations capable of up to 7 teraflops of computing power. 
The desktop market shrunk by 4.1% in 2012 and shipments continued to decline in 2013.  Nevertheless, defying the declining trend in the desktop market, Apple has aggressively priced the Mac Pro in the $3,000 – $4,000 range. Some argue that because Apple has used all high-end products its customers get a good deal. AMD has custom-designed the GPUs specifically for Apple. The dual D300 GPUs in the lower-priced Mac Pro are estimated to be worth $1200, while the D500 GPUs powering the higher-end version of the desktop are valued at $2500. 
AMD derives approximately 7% of its valuation from the professional graphics business segment, as per our estimate. The company currently accounts for 21% of the professional GPU market, which is dominated by Nvidia. However, the Mac Pro deal can considerably elevate AMD’s standing in the professional GPU market. Digitimes reports the deal could increase AMD’s professional GPU market share to 30% by the end of 2014. 
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As part of its restructuring initiative, AMD aims to derive 40%-50% of its revenue from high growth businesses, including professional graphics and semi custom devices, in the next two to three years. In addition to scoring the Mac Pro deal, AMD’s GPUs power all three next-generation consoles (Nintendo Wii U, PlayStation 4, and Xbox One)and together this helps the company move closer to its target.
Our price estimate of $3.55 for AMD is almost in line with the current market price of $3.77.Notes:
- New AMD FirePro Professional Graphics Deliver Unprecedented Levels of Performance for New Mac Pro, AMD Press Release, December 23, 2013 [↩]
- PC Market Forecast to Decline for a Second Consecutive Year in 2013, According to IDC, IDC Press Release, March 4, 2013 [↩]
- Apple’s Mac Pro is the new black, Computerworld, December 19, 2013 [↩]
- AMD may reach 30% share in professional GPU market in 2014, Digitimes, December 23, 2013 [↩]