Text size

Shares of chip maker Advanced Micro Devices (AMD) are down 12 cents, or almost 6%, at $1.97 following a report yesterday afternoon by Reuters's Nadia Damouni and Noel Randewich that said the company hired JP Morgan to "explore options," which was almost immediately followed by a company statement asserting AMD is not shopping itself.

Weighing on the shares today, principally, is the concern that the company lost share to competitor Nvidia (NVDA) in the third quarter in PC graphics processors, or GPUs, according to data released by Mercury Research.

BMO Capital's Ambrish Srivastava, who has a Market Perform rating on both AMD and Nvidia, AMD's market share in desktop computers in the quarter decline from 40.7% in Q2 to 35.7%, while Nvidia's rose from 59.3% to 64.3%. In notebook computers, AMD's share fell more dramatically, from 44.8% to 34.2%, while Nvidia's share rose from 55.2% to 65.8%.

Total "discrete graphics" chip shipments for AMD were down 14%, quarter over quarter.

As Srivastava writes, AMD and Nvidia are fighting for share in a market that is struggling:

Per the 3Q12 Mercury data, graphics shipments (discrete and integrated GPUs) were 123.9 million, roughly flat q-q. This is slightly above the 2% q-q decline in microprocessor shipments and well below the normal seasonal trend for total graphics shipments of up 13% q-q (five-year average).

On the other hand, Wells Fargo's David Wong, who has an Outperform rating on shares of AMD, writes that he had a number of meetings yesterday with AMD management and investors.

Wong ticks off the things that he thinks the company is doing, or can do, right to improve its position across multiple markets:

AMD is taking appropriate actions to reduce costs and streamline in product development efforts. We think that AMD has done a good job in leveraging its graphics and microprocessor expertise to create its APU product lines. We think that AMD's opportunity to design and sell chips into game consoles will very helpful in provided a near to intermediate term revenue boost as well as some nonrecurring engineering (NRE) funding for R&D costs […] We suspect that AMD has a contract to develop and manufacture game console processors for either one or two of the large game console maker (perhaps Sony (SNE) and/or Microsoft (MSFT)) systems that may be launching in the second half of 2013.