AMD Expands Its Professional Graphics Portfolio To Increase Its Footprint In The Market

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Earlier this week, AMD (NYSE:AMD) launched its new FirePro W8100 professional graphics card based on its industry leading Graphics Core Next (GCN) architecture. Promising thirty eight times the performance of the closest competing product, the AMD FirePro W8100 is designed for the next generation of 4K CAD (Computing Aided Design) and Media and Entertainment (M&E) workflows, engineering analysis and supercomputing applications. AMD believes that its new graphics card is the ideal professional-grade solution for CAD as well as applications dedicated to video editing, color correction, compositing, design visualization and GPU-accelerated compute tasks. The Pro W8100 will be available next month from AMD’s global distribution partner SAPPHIRE Technology, AMD Fire Pro Ultra Workstation providers, as well as other major workstation providers.

For many years, AMD has been underrepresented in the professional graphics segment, which is dominated by Nvidia (NASDAQ:NVDA). Nevertheless, competitive pricing and improving hardware have helped increase AMD’s professional graphics market share from 12% in 2009 to 20% at present. Strong performance in professional graphics was an important factor that drove AMD’s growth in the last few quarters. In Q1 2014, the company marked its seventh consecutive quarter of revenue and share growth in the professional graphics business segment. AMD is increasing its investment in the area to build a stronger relationship with key customers.

In December last year, Apple (NASDAQ:AAPL) announced that it is using AMD’s dual FirePro professional graphics solutions in its new Mac Pro (a professional desktop computer). AMD has custom-designed the GPUs specifically for Apple. DigiTimes reports the deal could increase AMD’s professional GPU market share to 30% by the end of 2014. [1] Apple Mac Pro is a solid long-term revenue stream for AMD’s professional graphics division as these are high-priced, high-margin products. The dual D300 GPUs in the lower-priced Mac Pro are estimated to be worth $1,200, while the D500 GPUs powering the higher-end version of the desktop are valued at $2,500. [2]

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AMD derives approximately 11% of its valuation from the professional graphics division, as per our estimate. If the company manages to hold onto the Mac Pro deal, it stands to gain significantly in the long run. If it is able to score additional design wins with Apple for its consumer products ( iMacs, Mac mini, Macbooks) in the future, it can gain additional share in the market. We forecast AMD’s professional graphics market share to cross 30% over our review period.

Our price estimate of $3.79 for AMD is almost in line with the current market price.

See our complete analysis for AMD

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Notes:
  1. AMD may reach 30% share in professional GPU market in 2014, Digitimes, December 23, 2013 []
  2. Apple’s Mac Pro is the new black, Computerworld, December 19, 2013 []