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AMD Looks to Regain Market Share in the Server and Gaming Sector

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Jan. 26 2016, Updated 9:05 a.m. ET

AMD’s transition to EESC

In the last part of the series, we saw that Advanced Micro Devices (AMD) witnessed a seasonal increase in CG (computing and graphics) revenue in fiscal 4Q15. However, the company has been looking to transition away from CG to EESC (enterprise, embedded and semi-custom). It accounted for 55% of the overall revenue in fiscal 2015.

EESC designs processors and SoCs (system-on-chip) for the server, embedded devices like automotive and consumer electronics, and semi-custom SoCs for several applications including gaming consoles.

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Fiscal 4Q15 performance

The EESC segment’s revenue fell 15% YoY (year-over-year) to $488 million in fiscal 4Q15. The operating income fell 46% YoY to $59 million. The fall was driven by softness in the server and embedded space. Even Intel (INTC), the market leader in the server space, reported soft sales. Royalties from game consoles also fell.

Server

AMD commands less than a 1% share in the server market. Intel dominates the market. The company aims to regain market share from Intel by launching ARM-based chips and x86 chips. It started volume shipments of its first 64-bit ARM SoC for the datacenter named “Opteron A1100.” It expects to develop advanced versions throughout 2016. ARM is a family of processor designs for different applications. It’s licensed by ARM Holdings.

AMD is on track to launch its x86 Zen architecture by fiscal 4Q16. The processor is believed to significantly bridge the technology gap with Intel processors.

Semi-custom

It’s important to note that 2015 was a record year for AMD’s semi-custom APU shipments. They surpassed the 50 million mark. The company supplies semi-custom APUs for Sony’s (SNE) Playstation 4 and Microsoft’s (MSFT) Xbox. It’s rumored that it won the contract for Nintendo. The demand for gaming consoles is expected to increase and drive semi-custom SoC sales in fiscal 2H16.

In the next part of the series, we’ll look at AMD’s overall performance in fiscal 2015. The Technology Select Sector SPDR Fund (XLK) has 9.5% exposure in the semiconductor sector. It has 3.1% exposure in Intel.

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