Advanced Micro Devices Inc. (NYSE:AMD) Plunges Sharply
Advanced Micro Devices, Inc (NYSE:AMD) recently posted 3Q13 results which markedly beat the street expectations but could not save the stock from tumbling more than 13.5% during Friday’s trade. Advanced Micro Devices Inc reported to have benefited from supply of processors to the gaming consoles like Microsoft Corporation (NASDAQ:MSFT)’s Xbox One as well as Sony Corporation (ADR) (NYSE:SNE)’s PlayStation 4. Though the company could not rescue 6% drop in personal computer chip sales which was expected to be countered by the Advanced Micro Devices Inc’s rapidly growing gaming console business.
Unlike other technology firms relying heavily on computer and laptops essential, Advanced Micro Devices, Inc. (NYSE:AMD) too need to seek newer business and markets to monetize from increasing demands in smartphone and tablets as the PC and laptop markets are continuously losing the market share. AMD has successfully competed against the larger Intel Corporation(NASDAQ:INTC) in supply of chips for personal computers.
The heavy fall in stock price after the announcement of results clearly indicates that the investors were still expecting some more high-tide including its newer gaming console semi-customized chips to make up for a sales decline of PC processors to help company return to profits. Stacy Rasgon, an equities research analyst with Bernstein mentioned that despite AMD beat the street expectations, buy-side expectations were a bit higher.
The another reason that might not have boosted investors’ confidence is 6% sales decline in PC processors during 3Q13 compared to 2Q13 which is starkly in contrast to Intel’s 3.5% increase in revenue from PC processors during the same period. Moreover Intel is also in plan to launch new chips for tablets and PCs, some of which would be directly competing with the low-cost laptops AMD has already been focusing on, threatening the AMD’s market share to a larger extent.
In addition, if one talks of chips for gaming console there is no clarity on success of gaming consoles in the time to come following their scheduled release in November 2013. This is because Microsoft and Sony need to win players from those who are already accustomed playing games on smartphones and tablets.