Intel Corporation (NASDAQ:INTC) has been suffering for years because of its image as a personal computer chip maker. That’s a legitimate knock on the company. Interestingly, Advanced Micro Devices, Inc. (NYSE:AMD) has seen its shares nearly double on news of game console chip wins. However, that’s not enough to make it a better option than Intel or a lesser-known chip player.
The technology industry is infatuated with mobile. There’s good reason for this, since mobile devices are proliferating at a rapid pace as more and more people become comfortable with the idea of using mobile devices to surf the web. That increasingly means use of video and music streaming services, too, which requires faster chips and more mobile bandwidth. It also requires more storage on the back end.
That last point is an important fact to remember. Every mobile device connected to the web is connecting to a physical computer that lives someplace. So, while Intel Corporation (NASDAQ:INTC) has been a laggard in the mobile chip space, it still sells a product that the mobile revolution needs. As the so-called “cloud” is built out, server chips are likely to remain a key product.
Intel Corporation (NASDAQ:INTC) benefits from being one of the best chip makers around. Although the impact of tablet computers on personal computer demand has led to a softening top line, that trend is overshadowing the positives at Intel Corporation (NASDAQ:INTC). And, the company has been working with Google Inc (NASDAQ:GOOG) to introduce mobile chips for Android devices. The shares, while off of their lows, are still languishing. The stock yields around 3.7%.
A Big Jump
Meanwhile, five straight quarters of sales declines at Advanced Micro Devices, Inc. (NYSE:AMD) coupled with three consecutive quarters of red ink have been welcomed by a massive share price advance. The big reason was some chip wins in the video game console market from giants Sony and, potentially, from Microsoft Corporation (NASDAQ:MSFT).
While those chip sales will be a big boost to the company’s top and bottom lines, it won’t likely change the bigger issues AMD faces. The company has always competed on price by being the cheapest chip option. That’s a fine model, but it has left the company as something of an also-ran.
The game console push is part of an attempt to diversify, since Intel Corporation (NASDAQ:INTC) isn’t a big competitor in the space. Unfortunately, the console market is tiny compared to the PC market. So, the nearly 10% first quarter decline in PC chip sales is still the bigger issue to watch at Advanced Micro Devices, Inc. (NYSE:AMD). While it, too, will benefit from increased demand for server chips, if the PC trend doesn’t change, the company could have a hard time making ends meet.
Luckily, the company has about $1 billion in cash and investments and no long-term debt. So, it isn’t likely to go out of business in the near term. However, it also isn’t likely to become a more material competitor in its primary market either.