Advanced Micro Devices, Inc. (AMD) is a global semiconductor company with facilities around the world. Recently, the company has been receiving a tailwind from design wins in the PS 4 and Xbox One. My initial estimate is for a $700 million revenues benefit to AMD, thus far. I think the company's financial performance should continue to benefit from the ramp of the new gaming consoles during the first half of 2014.
On the other hand, PC sales are expected to continue to slump during 2014. Declining CPU and GPU ASPs exacerbates the slump in PC sales. While I expect a 5% sequential increase in net revenue during the fourth quarter, I think net revenue could decline 5% in 2014. I think a smaller restructuring could be announced during the fourth quarter results. I would like to see operating expenses at about $400 million per quarter during fiscal 2014.
But an increase in revenues during 2014 on a stronger than expected PC market and/or stronger than expected semi-custom ramp could leave management with sufficient cash flow from operations to decrease the net debt footprint and unlock equity value. For the time being, I continue to think of AMD as a $6 billion to $10 billion company, which is trading at $3 billion.
Recent Developments
The organization announced the AMD Radeon R7 and R9 Series graphics cards, which also include AMD TrueAudio Technology.
AMD's SeaMicro SM15000 servers power Verizon's high-performance public cloud.
AMD detailed its plans to offer both 64-bit ARM and x86 embedded solutions starting in 2014.
Combined Xbox One and PS 4 sales topped 7M; I estimate $700 million of revenues for AMD.
