AMD Eyes The Medical Device Segment In The Embedded Market

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This week, AMD (NYSE:AMD) announced that its Radeon HD 7850 embedded GPU is used in Analogic’s BK Ultrasound system. Analogic is a leader in developing healthcare and security technology imaging solutions to advance the practice of medicine to save lives. By using AMD’s GPU technology, Analogic claims to have achieved a 3x improvement in the amount of information in each ultrasound image and reduced time from capture to presentation. Analogic believes that AMD’s embedded GPU technology has excellent quality and scalability, which helps its ultrasound system to deliver exceptional speed and image fidelity, allowing clinicians to identify anatomy and flow dynamics deeper in challenging patients. (Read Press Release)

AMD has a broad range of embedded processors for different segments in its portfolio, offering a number of price, performance and power options to meet the needs of embedded designers. The company intends to take on the different segments in the embedded market by offering its customers a range of solutions to chose from —  from low-power to high-performance — with a broad ecosystem of software and hardware partners supporting multiple operating systems, including Windows and Linux. The embedded market is a very competitive market and AMD’s strategy is to play to its strengths. The company is focusing on efficient computing and very strong visualization, factors that it believes differentiates it from other players and will fuel its growth in the embedded market. The company is a key player in digital signage, and has admitted in the past that medical devices is a segment of considerable focus and interest.

There is a growing need for more advanced embedded solutions in healthcare, finance, education and retail services. AMD witnessed strong embedded processor revenue growth and secured multiple new design wins across priority markets and started sampling its first embedded ARM-based device in Q3 2014. We expect new product launches in 2014 to accelerate AMD’s growth in the embedded market. At present, AMD derives around 60% of its revenue from the traditional PC and graphics segment (down from 95% a few years ago). With increasing investments in its embedded, semi-custom, and server businesses, the company is on track to derive 50% of its revenue from these high-growth markets  by the end of 2015.

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AMD currently derives around 8% of its revenues (< $500 million) from the embedded market. We estimate that the proportion of revenue earned from the embedded division will reach close to 15% of the the company total revenue over our review period, crossing $1 billion.

Our price estimate of $4.12 for AMD is at a more than 50% premium to the current market price, and we believe in the company’s long-term growth potential. (Read: AMD: 2014 Recap & What To Expect In 2015 & Beyond)

See our complete analysis for AMD

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