I'm bearish on AMD overall, because I'm worried that their 15%+ reduction
in their marketing teams (from 2013) has caused the situation that they're in right now. It doesn't matter how good the chip is if OEMs aren't gonna build it. IIRC, rumors was that ~10% of engineers were cut (ending the Bulldozer / Piledriver line of Opteron chips), while marketing was closer to 20% to 30%. The marketing fallout since then has clearly been a reduction in OEM offerings from Dell, HP and so forth.
Little history lesson: AMD's secret to profits in the 2006 was their Opteron line of server chips that sold for $1000+ a pop (and often two or even four were needed per server) with over 40% server marketshare. Companies like Google would buy them by the boatloads as the web expanded. I think the Opteron brand has a chance for 2016 with Zen for a breakout, maybe back up to 15% to 20% of server marketshare (with much cheaper ARM chips), but I'd hedge any bets on AMD until I was sure that they started making a comeback in that high-margin server market.
The high-margin server market subsidizes the R&D for other chips, and thats why Intel (with a strong Xeon server offering) can offer benefits even on the low-end of the market. (the Intel i3 uses much of the same technology as the advanced Xeon).
Without the high-margin server market, AMD is fighting with a disadvantage, and will continue to do so until they recapture server marketshare.
From a business standpoint, AMD has done an extremely innovative thing with Carrizo however, and it isn't really talked about in that article. Carrizo (Richland/Kaveri-replacement) and Carrizo-L (Temash / Kabini replacement) use the same socket
. It means that HP / Dell / other OEMs can make one motherboard design and have it use any
Carrizo or Carrizo-L chip. This should provide new flexibility in the marketplace and from a supply-chain perspective moving forward. (It likely means that higher-power like 35W laptops will be infeasible however... maybe?? But 22W laptops and lower are all the rage now-a-days). It also means that AMD has absolutely no short-term CPU desktop strategy unfortunately.
I know that AMD's low-power (Kabini A6-5200) chip has good representation across the major OEMs. (HP, Asus, Gateway, Toshiba to name a few). AMD's issue is with their higher-end (and higher-priced) chips, the Kaveri line (which corresponds to Carrizo). Kabini will become Carrizo-L, while the higher-margin Kaveri will become Carrizo, so this new strategy will likely yield more design wins for AMD. However, if OEMs continue to treat AMD as "inferior", AMD's brand will continue to degenerate. (its very difficult to find "premium" AMD-CPU laptops akin to Macbook Pro, Dell Latitude or Toshiba Kirabook)
AMD's sales teams should
have an easier job "selling" those chips to Dell / HP / Asus laptops, at least in the cheaper... lower-margin marketplace. But until I see major design wins, I'd hedge my bets against AMD.
Unlike NVidia, AMD only has one new GPU offering in their 300-line of cards. The rest appear to be rebrands right now. This suggests weakness in their engineering teams, possibly related to the cuts from years ago. Nonetheless, winning the Macbook Pro line is a big, so I'll have to admit AMD's GPU business looks relatively solid, and is probably underrated by current reports. Nonetheless, I still consider AMD's GPU business much weaker than before, as I can't find any AMD discrete cards in laptops outside of the Macbook Pro line and a couple of MSI laptops.
My American bias tends to ignore AMD's relative success in India and Mexico. Apparently, AMD's cheaper offerings are doing better outside of the US. Nonetheless, the reputation of AMD's brand is pretty low in computing circles in my area. Overall, AMD's branding is very weak compared to Intel. If Carrizo ends up being a hit from a hardware perspective, I doubt it will have any sales figures (in America) until several quarters go by.
The standard computer buyer recognizes "i5" and "i7". No one knows what an "A8" or "A10" offers.
As a consumer, I'd probably buy Carrizo depending on how the benchmarks come out. But this discussion is a bit different than an "investing" discussion. Also, while the 7970 / R9 280x / R9 370x rebrands (all the same chip) is a bit annoying from a consumer perspective, the card is honestly being offered at such a solid price its hard to not recommend it.
Overall, I like AMD's chips because they're at a good discount compared to Intel, and I personally find other components of the laptop more important. (ie: SSD or the screen). So I'll personally continue to buy AMD.
I'm personally not going to go short on AMD personally however (or pursuing strong bearish strategies like buying puts). They've cornered the video game market (WiiU, PS4, XBox One), they've cornered the GPUs on the entire Mac-line, they're re-entering ARM and have the best shot at ARM servers. But they're almost at like "startup" levels of risk. If AMD's Zen architecture (2016) and their ARM Opteron (2015) plans don't pan out, they're basically done for as a company. High debt, low cash, high turnover in their leadership positions, fewer product releases and weakening brand. They're in a high-risk situation for sure.
Yeah, its hard for me to be bullish on a stock that hasn't made a profit in 3 years (since 2012). But hey, the market has accounted for that. Beta is 2.2, Volatility is roughly 45%, and Options implied volatility is trading around 44%. The market knows AMD is a risky stock that can go anywhere. But I'm a very conservative investor, so I wouldn't touch something this risky.
And yet... AMD's Market Cap is 2.39B, which means the market currently thinks that they're half the company of GoPro. (lol, no). AMD's market cap also argues that they're worth 5x less than NVidia (Market cap 12B). So... ehh... at these bargain bin prices, AMD kinda has a fair evaluation by the market.
Lets see... AMD's market cap is comparable
to AOL (3.14B), Konami Corp (2.86B), Logitech (2.43B), BOX (2.19B), and Zynga (2.06B). I honestly dunno, I feel like AMD is "worth more" than these other companies innately even with all the headwinds against AMD. I dunno, maybe worth half of NVidia at least (NVidia seems fairly evaluated at ~12B against Altera and Xilinx) ?
Lol, by that analysis, that pegs the target price of AMD (in my mind) to $6. So that makes me a bull. Lulz. I'm so good at this game
I'll have to look through more financial figures (I know AMD is severely in debt right now) to normalize the price.
EDIT: Yeah, AMD is a company that hasn't made a profit in three years... is facing a shrinking marketplace (PCs are getting eaten up by Tablets, AMD has had no response for years against Intel's latest Xeons in Servers) and is currently has $3.7 Billion in total Liabilities ($2.0 Billion in long-term debt), with only $2.7 Billion in assets ($0.8 Billion cash on hand). http://ir.amd.com/phoenix.zhtml?c=74093 ... lyearnings
Anyway, I'd be interested in hearing your evaluation of AMD
. Really, it all comes down to price, what you think AMD should
be worth vs where it is right now. AMD is in a very bad position right now, but they still have technology, patents, and a top-notch engineering team. But its market cap is also absurdly
low, so its definitely a cheap stock to buy.