Gaming could be a game changer for AMD

With seven years of pent up demand for new games consoles, AMD is well placed to have the market stitched up for years to come.
Written by Adrian Kingsley-Hughes, Senior Contributing Editor

The PC ship is sinking and the established rats are deserting it in droves. One company that has worked hard to diversify is #2 chipmaker AMD, and some are predicting that this groundwork will soon begin to pay off for investors.

While companies such as Intel have been pinning their hopes on mobile to keep the dollars rolling in, AMD has instead been focused on another sector – gaming.

The underdog chipmaker has managed to negotiated its silicon into all the major games consoles, including the PlayStation 4 and the Xbox One. It has also announced plans to support Android and Chrome OS in addition to Windows, as well and supplying the GPU power for Apple's upcoming Mac Pro, all in an attempt to break free of the stagnant PC market.

While there's little doubt that PC gaming is waning, console gaming is huge, and AMD is looking at cashing in on seven years of pent up demand for new consoles, and with the company powering all three of the top name consoles, it has the market stitched up for years to come.

And the numbers are good. Estimates from analysts are typically scattergun, but at the top end, 10 million console processor over 2014 could add 24 cents to AMD's earnings.

Dan Niles, CIO at AlphaOne Capital Partners, believes that AMD shares could hit $8 by 2015, when the game business driving more than 20% of the company's revenue.

Another silver lining for AMD is China's recent lifting of a 13-year ban on game console sales. While there are still some restrictions in place, this opens out a whole new territory for Sony, Microsoft, and Nintendo, and all sales means money rolling in for AMD.

But, as is usually the case, every silver lining comes with a cloud attached, and in AMD's case that cloud is debt, lots of it, with more than $1 billion of which coming due between 2015 and 2017.

The road to recovery is going to be a long one for AMD, but the company seems to be taking steps in the right direction.

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