Advanced Micro Devices, Inc (NYSE:AMD) steadily processing profits
The 2nd largest PC processor-maker, Advanced Micro Devices, Inc. (NYSE:AMD) has projected Q3 sales that could be above a few analysts’ estimates. Though its revenues from the PC market have been on the downslide, it is being offset by increased revenue from other avenues. The company has expanded into newly launched game consoles as well as other markets. This indicates that the range could be from $1.38B-$1.45B while the average analyst sales estimate was $1.23B.
It is a decades old story. Advanced Micro Devices has always been tough competition for Intel when it came to supply of PC chips. Today, consumers are trending away from PC’s and transitioning to tablets and smartphones. AMD processors have now found their way into Sony’s PS4 and Sony’s Xbox One and the company’s upbeat forecast has been attributed to these factors. The PC market for chips shrank for its 5th consecutive quarter and AMD has diversified very strategically into the console market. Orders for console processors from Microsoft and Sony have set the company way ahead of CEO Rory Read’s target. His target had been to acquire over 20% of sales from newer markets. Analysts are estimating that the company will easily bring in over $250M in sales of console chips in 2013.
Profitability almost assured
AMD said that though its expansion into newer avenues is definitely helping sales it is still not benefiting the key profitability measure. This quarter, the % of sales after deducting production cost or gross margin will dip by around 36% in comparison to the Q2. From another analyst viewpoint, gross margin is not that important a factor when it comes to console chips as the R&D has already been paid for. Also, the company will not have to spend on any kind of marketing. It already has a strong base in the market and the fact that Microsoft and Sony have opted for it, is marketing enough- Well at least for the moment!