Transitions are scary because there is no right thing to do. The company has to take a chance and see where it leads. That is even harder when a new path will take years to fully evaluate. Nothing will be gained if nothing is ventured. Making a judgment long before a plan fully plays itself out is how legends are made.
1. If you cannot compete, avoid the gladiator pit
I really like the path that Advanced Micro Devices, Inc. (NYSE:AMD) is on. I am not 100% certain that it will work out, but I feel that its path gives it the best chance. The push into servers and the SeaMicro microservers is a good move. Servers are big business and microservers could become a welcome niche with that market.
If Advanced Micro Devices, Inc. (NYSE:AMD) can establish itself as a major supplier, then it could grab the lion’s share of microserver revenue. Microservers could make up 10% of the global server market by shipments. Advanced Micro Devices, Inc. (NYSE:AMD) has about $5 billion in revenue, and the global server market in 4Q2012 was $14.6 billion, so there is a lot of potential
Advanced Micro Devices, Inc. (NYSE:AMD) processing chips and GPUs are going into the two major home consoles of the next generation. Advanced Micro Devices, Inc. (NYSE:AMD) is already in the Wii U. The next generation will be a bit more crowded with the Steam Box and Ouya, but the Playstation 4 and the Xbox 720 are the forefront of consoles for now.
PCs and notebooks are shrinking rapidly, and Intel Corporation (NASDAQ:INTC) is already the leader there. Margins are probably low for the consoles, but Advanced Micro Devices, Inc. (NYSE:AMD) is not in a position to care about how little profit it makes as long as it can make a profit. Consoles sell in the millions so the volume is there. AMD is not in a position to follow Intel Corporation (NASDAQ:INTC) into mobile, but the win with consoles as well as its expense-cutting might increase profits and drive the stock up from these depressed levels.
2. Become a god of the arena
AMD would have no hope competing against the current companies in the mobile space. Intel Corporation (NASDAQ:INTC) stands a chance because it is Intel Corporation (NASDAQ:INTC). Despite entrenched and strong competition like Qualcomm, Intel Corporation (NASDAQ:INTC) really stands with little choice but to try for mobile. This is its move.