Advanced Micro Devices, Inc. (NASDAQ:AMD), better known as AMD, is one of the main contenders in the battle for microprocessor supremacy against Intel Corporation (NASDAQ:INTC). AMD stock peaked in 2000, moving above $90.00, only to crash to $15.38 just months later as the tech bubble burst. AMD stock’s next peak was a more modest $40.54 in February 2006. Since then, the stock has dropped and traded in a steady range between $1.50 and $8.90.
Choosing whether Intel or AMD powers your new computer is one of the most important decisions a buyer has to make, because it determines the features and characteristics of the actual PC. This is what has kept AMD stock alive: its indispensability. AMD and Intel address the same need but in different ways. One of AMD’s advantages is its legacy of 10,000 patents, which are now coming to AMD stock’s aid. (Source: “Surprise in Store: AMD’s Fiscal 4Q15 Earnings,” Market Realist, January 18, 2015.)
The patents are the key to AMD’s strategy to help finance its research and development in order to resume growth. AMD has asked itself the very question of whether the solution to its problems resides in its patents. AMD, the second-largest microprocessor manufacturer in the United States, is going to add to its value by exploiting its intellectual property, following the example from Qualcomm, according to CEO Lisa Su. Su discussed the plans during AMD’s 2015 annual results presentation on January 19, 2016. (Source: “AMD Reports 2015 Fourth Quarter and Annual Results,” CNN Money, January 19, 2016.)
“We believe that AMD will most likely partner with an OEM or Webscale company where its partner designs its own chip using AMD IP. We believe this type of arrangement will go a long way to driving profitability,” noted AMD. (Source: “Advanced Micro Devices’ EPS Preview: What Will Drive Profitability?” Benzinga, January 19, 2016.)
Patents Are the Best Defense for AMD
AMD has a portfolio of approximately 10,000 patents in areas such as microprocessors, graphics processing, integrated circuits computing accelerator, and other semiconductor devices. Until recently, AMD has used its patents mostly to protect itself from Intel’s market encroachment, as a legal shield against Intel, which now dominates the markets for “X86” processors for PCs and servers.
Already in previous quarters, AMD’s CEO, Lisa Su, expressed her interest in exploiting the company’s vast intellectual property resource, licensing or selling some as opportunities dictate. AMD could even use its intellectual property and technology to help partners meet their industrial objectives. (Source: “AMD Surging: Advantage in ‘HBM,’ Says FBR; Monetizing IP,” Barron’s, June 17, 2015.)
“Dr. Su believes that if AMD’s core processors (particularly server) can surpass minimum performance thresholds, the company’s products present a strong performance per cost value proposition versus AMD’s larger competitor.” (Source: Ibid.)
Will AMD Stock Rally in 2016?
Intellectual property is but one of the tools through which CEO Su will be prompting AMD’s rebound in revenue and inevitably AMD stock. The company will be improving its range of products for PCs and servers, which is its Achilles heel with respect to Intel.
Moreover, by the end of 2016, AMD expects to shift to 14 nm “FinFET” technology (3D transistors – 14 nanometers). (Source: “Samsung Announces Mass Production of 2nd Generation 14-Nanometer FinFET Logic Process Technology,” Samsung, January 14, 2016.) The company’s most advanced current circuits rely on conventional 28-nanometer technology from TSMC. (Source: “AMD Demonstrates Revolutionary 14 nm FinFET Polaris GPU Architecture,” EFYTimes, January 19, 2016.)
In the short-term, AMD stock should not see major changes, as 2015 sales dropped 27.5% to $3.99 billion, widening its losses to $660 million, against $403 million in 2014, despite the good sales results of its personalized semiconductors for game consoles and embedded applications. (Source: “AMD announced a loss of $ 102 million in the fourth quarter 2015,” Unlockpwd, January 19, 2016.)
Yet, AMD stock is poised for a boost. CEO Lisa Su is confident of AMD’s prospects for 2016. She confirmed the release of AMD’s next-generation processor architecture, “Zen,” with the chips slated to enter a luxury computer near you in late 2016. This move should spearhead growth and profitability for AMD stock in the second quarter of 2016. (Source: “AMD’s Zen processors set for high-end hardware in late 2016,” Digital Trends, January 20, 2016.)