Will This Product Release Help AMD Escape Intel’s Shadow?

Intel (NASDAQ:INTC) casts an extraordinarily large shadow over Advanced Micro Device’s (NYSE:AMD) business; during the last quarter, AMD’s share of the server chip market fell from 5.2 percent to 4.5 percent, while Intel took on the remaining market share. But the semiconductor manufacturer has a plan to capture a larger share of the cloud computing market with a new line of Opteron chips.

AMD’s Business Reorganization:

AMD may be planning to cut 15 percent of its workforce and lower costs by $190 million as part of its restructuring efforts, but the company is also focused on catching up to the competition.

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On Tuesday, the company unveiled nine new Opteron 4300 Series and 3300 Series server processors that were designed to be used in cloud servers that process Web transactions. Replacing the older 4200 and 3200 server chips, which were introduced late last year, the new processors “offer up to 15 percent better performance versus the prior generation,” stated the company’s press release.

The new chips are meant to revive the company’s declining server business. As Mercury Research analyst Dean McCarron told the information technology publication InfoWorld, cloud servers represent a high-volume market, and therefore every successful design can help AMD regain market share from Intel.

AMD is also looking to increase its share of the graphics card market, which has fallen to 30 percent as rival Nvidia (NASDAQ:NVDA) has made corresponding gains. Based on information from its sources in the upstream supply chain, DigiTimes reported that AMD has decided to release its Radon HD 8000 series GPUs in the second quarter of 2013 to combat Nvidia’s next product release scheduled for the first half of next year.

CHEAT SHEET Analysis: Can a New-Product Pipeline Help AMD?

One of the core components of our CHEAT SHEET Investing Framework requires that companies consistently produce successful products or services. AMD manufactures microprocessors used in servers, desktop PCs, and notebook PCs, but as the increasing popularity of smartphones and tablet computers has lowered consumer demand for the traditional computer formats, AMD’s business has taken a hit. The company derives more than 75 percent of its value from the PC market. Furthermore, management changes within the company have prevented AMD from developing a sustainable growth strategy that would make it less dependent on its PC business. With these problems drawing the company’s stock down 62 percent this year, server microprocessors may be the only sector where AMD can improve its product pipeline.

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