Advanced Micro Devices has had a solid first half of the year, but there are worries about the rest of 2010 because the chipmaker is dependent on consumer demand.
AMD has had a few interesting developments of late and most of them are promising:
- The company is shelving the ATI graphics brand.
- It outlined its roadmap for its Bobcat and Bulldozer processor cores. Bobcat is AMD's processor for ultra-thin notebooks. Bulldozer is for high performance PCs and servers.
- Meanwhile, AMD has been making the rounds talking about its Fusion platform and the holiday season ahead.
The rub: AMD is heavily focused on the consumer and worries have escalated following Intel's revenue warning. The gist of Intel's revised outlook: Consumer spending is weaker than expected, but the enterprise upgrade cycle remains strong.
Analysts of late have been cutting AMD estimates for the third quarter following Intel's warning. Wells Fargo analyst David Wong wrote in a research note:
Given that AMD has higher consumer exposure than Intel, we think that AMD’s microprocessor business is likely to be impacted more than Intel’s by consumer weakness. AMD’s GPU business (graphics chips) is also primarily consumer we believe. On the other hand, supply constraints limited AMD’s June quarter GPU shipments, which could provide some buffer against potentially softening GPU demand in the September quarter.
Indeed, Intel's enterprise strength allows it to handle a consumer slowdown. Wedbush analyst Patrick Wang said:
Intel’s enterprise business remains steady and in-line with original expectations as corporations continue to refresh servers and PCs. Recall, the enterprise drove upside to 2Q results.
Can AMD navigate a consumer slowdown? Analysts cite a bevy of wild-cards. among the moving parts:
- AMD is winning notebook design wins that should help out in the fourth quarter. Those design wins may offset inventory worries if demand slows.
- Most of those design wins are related to graphics chips. Macquarie analyst Shawn Webster said that AMD may be gaining share from Nvidia.
Simply put, AMD is widely expected to cut its outlook for the third quarter, but the damage may not be all that bad. One thing is certain: AMD won't enjoy the enterprise upgrade buffer like Intel. AMD's fortunes will ride with consumer demand for PCs.
Here's a look at AMD's roadmap: