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AMD And NVIDIA Gain Graphics Market Share

Posted on Monday, May 17th 2010

HP recently introduced seven laptops with AMD’s (NYSE:AMD) chips. This should boost AMD’s efforts to increase its laptop microprocessor share, which has been declining. According to IDC, AMD’s market share dropped  from 15% last year to 12.1% in the first quarter, while Intel dominates the market with an 87.8% share (up from 84.3%). Let’s take a closer look.

HP also announced the release of two laptops with Intel processors. Intel chips offer better performance and battery life, but AMD-based laptops offer good price–performance value. Laptops with AMD chips could typically be around 15% to 20% cheaper than Intel-based laptops and could stretch battery life to over five hours, while Intel-based laptops offer battery life of over six hours. The new laptops will come with AMD’s Phenom II, Turion II, and Athlon II and V-series processors.

AMD is expected to launch Fusion, which combines the central processing unit (CPU) and graphics processing unit (GPU) by the end of the year. Fusion has been in the works for a long time, and next year Intel is expected to launch a similar processor that will have its own GPU-on-chip. Apple is rumored to be interested in using Fusion instead of Intel CPUs in Macs since Fusion will support Apple’s Open Computing Language (OpenCL).

There are a lot of ifs and buts to AMD’s winning Apple’s business. Will AMD be able to launch its much-anticipated Fusion on time? With Intel coming up with a similar product, AMD could lose out on the first mover advantage of its innovation.  And if Intel also supports OpenCL, AMD’s chances of scoring an Apple deal are very slim.

Apple uses AMD’s ATI Radeon graphics in some of its Mac products, but it has never used its CPUs. AMD has just 9.8% of the PC and server chips market compared to Intel’s 90.2%. In the desktop PC processor segment, Intel has a 71.7% share while AMD has 28.0%.

It is a different story in the graphics market, where Intel’s share has declined as NVIDIA (NASDAQ:NVDA) and AMD have gained share. Intel leads the graphics market with 45.49% and NVIDIA is No.2 with 33%. Last year, Intel had a 51.1% share and NVIDIA had 26.5%. AMD is No.3 with 25.15%, up from 21.7% last year. Apple recently refreshed its MacBook Pro line with computers that included NVIDIA’s GeForce 320M processor. This should further boost NVIDIA’s market share.

NVIDIA is gravitating toward providing chips for tablets and cell phones. During the quarter, the first phones using NVIDIA’s Tegra processors, the KIN One and KIN Two from Microsoft, started shipping. Earlier this year, NVIDIA unveiled a second-generation of the Tegra that target cell phones running on Android.

AMD reported first quarter revenue of $1.57 billion, up 33%. Net income was $257 million or $0.35 per share compared to a loss of $416 million or $0.66 per share last year and profit of $1.18 billion or $1.52 billion last quarter. Q4 analysis is available here.

Gross margin improved to 47% from 45% in the previous quarter, and the company ended this quarter with $1.93 billion in cash. Graphics revenue increased 88% to $409 million, and computing solutions revenue increased 23% to $1.16 billion.

AMD expanded the ATI Radeon HD 5000 family of graphics cards with seven product introductions. Acer, Asus, Dell, HP, Lenovo, and Toshiba broadened their AMD-based client offerings with the expanded AMD Athlon II and Phenom II desktop processors and the latest AMD Turion mobile processors.

HP, Dell, Acer Group, Cray, SGI, and other leading computer manufacturers announced plans for more than 25 new platforms based on the AMD Opteron 6000 Series server platform, featuring the world’s first 8- and 12-core x86 processor for the high-volume 2P and value 4P server markets.

AMD expects revenue to be down seasonally for the second quarter. It is currently trading around $8.79 with market cap of about $5.92 billion. It hit a 52-week high of $9.95 on December 24.

Chart forAdvanced Micro Devices Inc. (AMD)

NVIDIA on the other hand recently reported first quarter revenue of $1 billion, up 51%. It swung to a profit of $137.6 million or $0.23 per share from a loss of $201.3 million or $0.37 per share last year and $131.3 million or $0.23 per share last quarter. Gross margin increased to 45.6% from 44.7% last quarter and 28.6% last year. Q4 analysis is here.

NVIDIA’s GPU revenue was flat from the typically strong fourth quarter. Its professional graphics revenue grew 20% sequentially but its consumer revenue declined 31%.

For the second quarter, NVIDIA said that it expects revenue to be down seasonally 3% to 5% from the first quarter, indicating revenue of $950 million to $970 million. Analysts expect $990 million. Gross margin is expected to increase to 46% to 47%. Following the conservative guidance, the company’s shares are trading around $12.96 with market cap of about $7.37 billion. It hit a 52-week high of $18.78 on December 30.

Chart forNVIDIA Corporation (NVDA)

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