Tablets Creating ‘Disruption’ in Notebook Market, AMD Says

Tablet computers have been creating “disruption in the notebook market” over the last quarter or two, Advanced Micro Devices CEO Dirk Meyer said in an earnings call Thursday. Meyer said he thinks there has been “cannibalization by tablets” of netbooks and notebooks, and “given the pretty high price points of the iPad there’s probably some cannibalization even of mainstream notebooks."

AMD was still able to report stronger Q3 results than it did in Q3 a year ago. Sales grew 16 percent to $1.62 billion. Its non-GAAP profit rose to $108 million, 15 cents per share, from $2 million, 0 cents per share, in Q3 last year. Its net loss narrowed to $118 million, 17 cents per share, from $128 million, 18 cents.

The company believes that in the long term the tablet form factor will be “accretive to the market opportunity for companies like AMD,” Meyer said. But he said the company wasn’t in a rush to become a major player in the tablet market. AMD’s “overall strategy with respect to tablets is to first observe that that’s a form factor that we think is going to grow over time and be important over time,” he said. It’s a form factor that AMD will “devote specific R&D energy towards when the market is big enough to justify that investment,” he said.

"Frankly, we're still so small in the notebook market that given all the opportunities in front of us it doesn’t make sense for us to start turning R&D dollar spending towards the tablet market yet,” Meyer went on to say. AMD will “start doing that when the market is big enough, and then you can anticipate we'll show up with a differentiated offering with great graphics and video technology.” AMD’s notebook share is still “pretty low at 13, 14 percent,” he said. He hopes the company will be able to improve that, as well as its share in netbooks “over time,” he said. Noting the tablet market was “still a pretty new” one, he predicted we'll “see tablets of various form factors and thicknesses over time."

AMD’s Q3 “performance was a good demonstration” of the chip maker’s “capacity to execute profitably” within the context of its business model, Meyer said. Its improved results were achieved “despite an environment of weaker than expected consumer demand,” he said. The company saw “relative weakness in North America and Western Europe consumer markets for notebooks” in Q3, he said. But he said, “Emerging markets still represented a pretty good source of growth. In particular, China was still a strongly growing market in Q3, although the growth rate there was … lower than what we saw in the first half” of the year.

The company “set an all-time record for notebook MPU shipments” in Q3 in its client business, while adding IBM to its customer base offering AMD Opteron 6000-based systems in the server business, Meyer said. In the graphics business, Apple “refreshed” its Mac and Mac Pro desktop computers with AMD’s new Radeon GPU line, making Radeon GPUs “the only graphics solution for all configurations of these products,” he said. To date, AMD shipped more than 25 million DX11 GPUs, and it will be launching second-generation DX11 graphics offerings this week, he said. AMD’s Brazos chip platform rollout plan “is ahead of schedule, with customer shipments on track for” Q4 and “customer systems available early next year,” he said. The Brazos line of chips combine “low-power x86 processor cores and discrete-level graphics capabilities in a single” AMD Fusion Accelerated Processing Unit (APU), it said. AMD predicted that Q4 revenue will be about “flat” with Q3.