AMD’s New Hardware & Software Lineup Can Help It Further Increase Its Market Share In GPUs

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Advanced Micro Devices

AMD’s (NYSE:AMD) stock price has increased by over 40% in the last three months, though year-to-date the stock is still down more than 10%. The company has been the worst hit by weaker than expected PC demand, despite a flourishing semi-custom business. With market share losses to Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA), as well as a limited footprint in new emerging markets, AMD has seen a steep decline in its revenue base so far this year. The company expected to see some improvements in the back half of the year driven by some semi-custom wins and its newest APU and GPU products. Indeed, AMD did see some improvement in its Q3 2015 earnings, with revenue increasing 13% sequentially (beating Wall Street estimates), though year-on-year revenue was down 26%.

AMD claims to have successfully executed many of its technical priorities in Q3 2015; and while last quarter earnings were not particularly encouraging, it does look like that things could turnaround going forward. Expanding its portfolio with the introduction of several new APUs and GPUs that improve the company’s competitive positioning in key markets, is one of AMD’s key focus area to re-accelerate its growth. In the last few months, the company has launched new APU and GPU products in the market, and the company claims that its strategy to profitably regain share by capturing key hardware and software technology transitions, like HBM and DirectX 12, is gaining traction.

Earlier this week, AMD  launched a completely revamped graphics software suite, Radeon Software Crimson Edition, which significantly improves user experience for PC gamers. The Radeon Software Crimson Edition offers users an exceptional user experience, 12 new or enhanced features, up to 20% more graphics performance, and adjustability than can nearly double generational energy efficiency. The release is the first from AMD’s newly formed Radeon Technologies Group, which recently announced a renewed focus on software, placing it on par with hardware initiatives. (Read Press Release for more details)

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A greater focus on the software side is perhaps what the company needs to renew investor confidence in its long-term growth potential. PC gaming is a growing market that is estimated to increase from around $26 billion in 2014 to $35 million in 2018. Consumers are increasingly spending not just on software, but also on PC hardware, as they buy expensive equipment to play, view, and record games.  ((PC Gaming to be worth $35 billion in 2018, Venture Beat, March 2, 2015))

According to research firm Jon Peddie Research, AMD’s quarter-to-quarter total desktop Add-In-Board (AIB) unit shipments increased 33.3%, and the company managed to increase its market share in discrete GPUs to 18.8% in Q3 2015. Much of the increase was on account of the new GPU products launched by AMD. Though Nvidia continues to account for the lions share of the GPU market, AMD’s share gain last quarter is encouraging news for investors given that the company’s discrete GPU market share hit rock bottom (18%) in Q2 2015. (Read: Can AMD Sustain Its Share Gain in Discrete GPUs?)

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We believe that AMD’s new Radeon AIB lineup and the Radeon Software Crimson Edition can help the company gain additional market share in discrete GPU’s. Our price estimate of $2.33 for AMD is now marginally below the current market price.

See our complete analysis for AMD

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