Computing and graphics segment is a source of concern
In 3Q14, AMD’s (AMD) computing and graphics segment reported a quarter-over-quarter and year-over-year decline in its revenues of 6% and 16%, respectively. AMD cited a drop in the sales of chipsets and graphics processing units as the reason for its sequential decline in revenues.
Year-over-year decline was chiefly a result of decreased notebook processor and chipset sales. The company also reported a $17 million operating loss in the segment, compared to last year, when it earned $9 million in income. Poor performance by this segment weighed heavily on AMD’s overall growth.
If AMD continues to post disappointing results, it will impact exchange-traded funds (or ETFs) like the First Trust Technology AlphaDEX Fund (FXL), the SPDR S&P Semiconductor ETF (XSD), and the iShares PHLX Semiconductor ETF (SOXX) that have significant exposure to AMD.
AMD still derives the majority of its revenues from PC space
Intel’s (INTC) dominance in PC and high-end computing space has impacted AMD’s growth as it derives the majority of its revenues from the PC segment, as the above chart shows. To find out more about Intel’s 3Q14 results, please read Market Realist’s series on Intel’s 3Q14 earnings review.
In the past, poor execution and bulldozer architecture has added to the problems of the company, leading it to revise its business strategy and shift focus from PC to other growth areas.
Intel’s dominance in PC space
Intel, a leading player in the market, reported a revenue growth of 9% in PC chips and a 21% increase in chip sales. On the other hand, AMD posted a decline in its PC segment. Falling sales in the PC segment are a cause of concern, especially since Intel in its 3Q14 results posted strength in the segment amid increasing corporate spending on PCs.
To learn about the factors causing a decline in AMD’s computing segment, please read Market Realist’s series Why AMD’s Computing Solutions segment is declining.