Advanced Micro Devices, Inc. (NASDAQ:AMD) Facing Tough Competition from Intel

Advanced Micro Devices, Inc. (NASDAQ:AMD) is being very picky about the companies it works with. Recently, an AMD executive pointed out that the market for chrome books is at rock-bottom with unattractive margins. The lack of interest from AMD has allowed its rival Intel to make the most of the chrome book market. Consequently, AMD earnings have been on the decline, with Intel gaining more and more in revenues.

Have analyst identified a strong buy signal for AMD?

The last year’s gross profit margins came to just about 33.4%. This was a drop from its low range of 40% in the past. On the other hand, during the same period, Intel has been crossing the margin of over 63%. Although, a greater part of this revenue comes from Intel’s data center chips, which had helped it move its operating margin over 42%, Intel is still making a lot by incorporating its chips in chrome books.

However, analysts still argue that AMD still has great intellectual property, but the company just lacks plans to monetize these properties. Unfortunately, the consumers fail to agree with the analysts, since AMD products continue to lose market share. AMD’s lead x86 processors are simply outclassed by superior technology by Intel. Even in terms of graphics, NVIDIA products are known to deliver better performance per-watt over AMD counterparts.

The only intellectual property that AMD can make the most of is its ARM core. The company is still in the process of designing products around its ARM core and it remains to be seen how well they perform. Most of the ARM products are currently mobile based, which would again have a similar profit margin as the Chrome books. What the company management is failing to see is that, even though the gross profit margins seem low, but the number of sales would more than make up for it. It costs the company a whole lot less to manufacture chips for chrome books or mobile platforms, as compared to conventional computers.

Advanced Micro Devices, Inc. (NASDAQ:AMD) closed at $2.33 after gaining 2.19% on April 23. The company has 776 million shares being traded in the market, with a 52-week range of $2.14-$4.80.



Erica is a graduate of New York University's school of Journalism. She joined US Markets Daily as a general assignment reporter in January of 2008.