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Why AMD Shouldn’t Ignore the Internet of Things

Caporegime
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Shares of AMD (NASDAQ: AMD ) have plunged 37% over the past 12 months as the struggling chipmaker announced layoffs and missed Wall Street's third-quarter earnings expectations under new CEO Lisa Su.

On Monday, AMD announced the departure of three top executives: Senior Vice President John Byrne, Chief Marketing Officer Colette LaForce, and Chief Strategy Officer Raj Naik. Byrne notably only spent seven months as general manager of the company's computing and graphics division.

Just last week, Byrne discussed his view of the Internet of Things, or IoT during a VentureBeat interview at CES 2015. When asked whether AMD would expand into the IoT market as Intel (NASDAQ: INTC ) has done with wearables and tiny Quark chips, Byrne flatly replied, "I'm not in the business to lose money. Share and revenue is nice but so is profitability." Byrne emphasized that AMD should focus on improving the performance and power efficiency of its x86 chips instead.


Source: Wikimedia Commons, Wilgengebroed.

But now that Byrne has moved on, it might be time for AMD to reevaluate its position on IoT, which could prevent it from being crushed between Intel's x86 chips and NVIDIA's (NASDAQ: NVDA ) GPUs.

The business of the Internet of Things
The concept of IoT is that everything -- wearables, cars, home appliances, and more -- will be connected to one another through various wireless standards. Research firm IDC believes the global IoT market will grow from $1.9 trillion in 2013 to $7.1 trillion by 2020. Presumably, that rising tide could lift chipmakers such as Intel, networking companies such as Cisco (NASDAQ: CSCO ) , and Internet giants including Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ) .

Intel's Internet of Things division consists of embedded chipsets that are used in retail environments, industrial sites, buildings, homes, and transportation. Over the first nine months of 2014, revenue at Intel's IoT group rose 23% year over year to $1.55 billion as operating income improved 26% to $431 million. While Intel's IoT segment only accounted for about 4% of its revenue and operating income during that period, its double-digit growth and profitability strongly suggest IoT might not be a money-losing venture for AMD after all.

AMD, though, lacks Intel's market clout -- according to IDC's third-quarter numbers, Intel controls 98.5% of the server market, 90.3% of the notebook market, and 81.8% of the desktop market. This means Intel can likely sell more embedded solutions on the foundations of its x86 market share than AMD can.

Birds of prey
That's not to say AMD does not have any embedded products at all. Last year, the company unveiled several such products -- Adelaar, Steppe Eagle, Bald Eagle, and Hierofalcon -- to expand into industrial control and automation, digital gaming, medical imaging, digital surveillance, smart TVs, and other non-PC businesses.

While those "birds of prey" are certainly scouting ahead for a possible expansion into IoT, AMD hasn't split those technologies into a separate IoT business in the way Intel has. Instead, they reside in AMD's enterprise, embedded, and semi-custom (server and embedded processors, systems-on-chip, engineering services, and royalties) business.

In the first nine months of 2014, revenue from that segment more than doubled to $1.8 billion and accounted for 42% of AMD's top line. That growth was helped by robust system-on-chip sales of for Microsoft's (NASDAQ: MSFT ) Xbox One and Sony's (NYSE: SNE ) PlayStation 4 consoles.

Like a frog in boiling water
AMD has always been considered the cheaper alternative to Intel and NVIDIA, respectively, in x86 chips and high-end graphics cards. The problem is that whenever AMD's market share declines, margins fall as it tries to generate fresh revenue growth with cheaper products.



AMD Operating Margin (TTM) Chart

Source: YCharts

In the first nine months of 2014, AMD's computing and graphics revenue (which accounted for 58% of its top line) fell 13% year over year as it posted an operating loss of $20 million. AMD is also falling behind the technological curve when it comes to mobile processors -- its new 28-nanometer mobile Carrizo system-on-chip might not appeal to tablet and two-in-one manufacturers, which are already experimenting with Intel's 14 nm Core M chips.

As AMD's market share remains under pressure in x86 chips and GPUs, it is increasingly finding itself being cornered by Intel. I believe AMD's revenue will keep declining unless the company increases the weight of its higher-growth embedded devices and system-on-chip offerings on its top line. Expanding the company's IoT efforts would be a reasonable way to do so, and would be a solid starting point for Byrne's successor.

http://www.fool.com/investing/general/2015/01/15/why-amd-shouldnt-ignore-the-internet-of-things.aspx

Shots fired!

A 37% dive in share prices in 12 months is a real worry and missing the 3/4 targets doesn't help.
 
I hate the IoT idea. Do you really want N Korea to hack your freezer and thaw out your meat?

That's not a world I want to live in!
 
I love the idea of internet everywhere. Sitting at my comp or coming home from work or walking the dog, I pick up my phone or watch and tell it to make me a Coffee and when I walk in the door 2 minutes later, there it is.

nVidia are seriously making strides in the car industry and self drive cars are predicted to be with us by 2020.
 
I'm with Foxeye on this. Why would I want to let some hacker have full access to my house, my car, etc. simply because BMW or Audi or whoever missed some backdoor route into the code?

That's before you even get onto the concept of trusting self-driving car code to be bug free enough not to cause an accident.
 
I'm with Foxeye on this. Why would I want to let some hacker have full access to my house, my car, etc. simply because BMW or Audi or whoever missed some backdoor route into the code?

That's before you even get onto the concept of trusting self-driving car code to be bug free enough not to cause an accident.

The code will fail and it will cause accidents, the question is, is it more often or less often than a human?
 
I can't wait for the day when Samsung release televisions with the ability to remotely kill them so you have to buy a new one, as if selling them with capacitors that die after 2yrs wasn't already annoying enough.
 
I can't wait for the day when Samsung release televisions with the ability to remotely kill them so you have to buy a new one, as if selling them with capacitors that die after 2yrs wasn't already annoying enough.

To be fair my Samsung plasma is still going strong after 5 years good use (which I'm thankful for, as I sold it to a mate 2.5yrs ago!! :D)
 
Yeah, if the toaster thinks it's getting internet access to browse for pr0n then it's got a another think coming!!!! :D

lol this just made me think of the gob ***** toaster on the early episodes of red dwarf :D

On a more serious note, falling share prices are never a good sign how ever someone wants to dress it up. A company I worked for was worth ~£30m, some bad investments and poor planning annihilated the share price and valued the company somewhere under £1m. Ended up bought out by a competitor, off the stock market and reaching worth of over £100m :cool:

I guess my point is, if it does get THAT bad for amd, plenty will be lined up to invest in their many potential revenue streams. Personally I think Dr su has been brought in to steady the ship and make amd an appealing investment for any potential suitors.

Just hope we don't see any more job cut news coming out of amd, it's never nice hearing news like that.
 
I love the idea of internet everywhere. Sitting at my comp or coming home from work or walking the dog, I pick up my phone or watch and tell it to make me a Coffee and when I walk in the door 2 minutes later, there it is.

I'm the opposite, I'm on call all bloody day, with two bloody phones! the last thing I want is to take it with me when I walk the dog, that would ruin the best part of my day!
 
I'm the opposite, I'm on call all bloody day, with two bloody phones! the last thing I want is to take it with me when I walk the dog, that would ruin the best part of my day!

I don't carry a phone

I don't even know how to use most of the things on a mobile phone and I want to keep it that way. It is nice when people can not get hold of you.:D

I have never sent a text message either.:D
 
I don't carry a phone

I don't even know how to use most of the things on a mobile phone and I want to keep it that way. It is nice when people can not get hold of you.:D

I have never sent a text message either.:D

amish1.jpg


:eek:

:D :D :D
 
Greg periodically trawls the net for these articles that make AMD look bad and takes glee in posting them. This isn't about GPUs either. Also Motley Fool shorts AMD to make money.
 
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