Advanced Micro Devices Inc. (NYSE: AMD) said its third-quarter revenue fell 10% and blamed the “macroeconomic environment” for the trouble. Traders dropped its shares by 15% to 52-week lows on fears that the numbers confirm the “death of the PC” stories. If the personal computer market is in trouble, as recent Gartner data show, then AMD’s prospects may not recover. On the other hand, if AMD’s position as a distant second to Intel Corp. (NASDAQ: INTC) in the PC and server markets, and its inability to crack the market for mobile device chips, are the causes, then the worry of a broad PC-based collapse are unfounded, or at least premature.
AMD has run behind Intel in sales and market share for years. Its only victory over its bigger rival was an antitrust settlement in 2009, which did not shift the balance of power. In most quarters, AMD is fortunate to have 25% of the chip sector, and that number could have plummeted recently. Intel has research and development capital that AMD can only envy. The best chips at the lowest prices will always define success.
AMD has shown no ability to crack the market for mobile electronic devices and smartphones. Even Intel has struggled in that market. Qualcomm Inc. (NASDAQ: QCOM) remains at the top of the totem pole as a smartphone supplier, as do ARM and Samsung, which supply the chip for the Apple Inc. (NASDAQ: AAPL) iPhone 5, to a lesser extent. Intel has invested untold hundreds of millions of dollars to create, manufacture and market its Atom processor for mobile devices. It has been a failure by Intel’s own standards, which are to dominate the sectors in which it does business.
AMD is so far behind competition in the smartphone processor business that a slackening of PC demand cannot be made up for by other products. That means if the company has lost sales because of the faltering PC industry, or has lost market share, it is trapped in a downward spiral that will all but ensure that its problems, so bleak for so long, have become insoluble.
Douglas A. McIntyre