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In a bid to capitalize on the growing popularity of gaming devices, Advanced Micro Devices Inc. (AMD - Analyst Report) recently launched its new graphics processing units (GPUs) — AMD Radeon™ R7 240, AMD Radeon™ R7 250 and AMD Radeon™ R7 260X.

The AMD Radeon R7 Series graphics cards are ideal for users who need superior graphic performance for gaming. Powered by AMD Graphics Core Next (GCN) architecture, the new graphics cards support Mantle technology and provide strong graphics performance from web browsing to video editing. Additionally, AMD’s GPUs support DirectX® 11.2 and are compatible with Microsoft’s (MSFT - Analyst Report) Windows 8.1 platforms, which give it the desired speed for optimal graphics solutions required in notebooks and desktops.

Additionally, AMD Radeon R7 260X graphics card features a new AMD TrueAudio technology, which gives good sound effect for gamers through stereo headsets and speakers3. Consumers prefer an improved soundscape for gaming along with rich graphics. Thus, AMD’s revenues stand to benefit significantly if the latest GPU can cater to the rising demand of the users.

AMD’s processors have become highly popular among gaming console makers and will be used in Sony Corp’s (SNE - Snapshot Report) PlayStation 4, to be released on Nov 15 in the U.S. Additionally, AMD’s processor has been used in Microsoft Corp.’s (MSFT - Analyst Report) new Xbox video game console, to be launched on Nov 22.

Gaming has become a focus area for AMD now. Both the next generation gaming consoles will feature AMD accelerated processing units, which will boost the company’s business. We believe that these wins have positioned AMD at the center of the console gaming industry and will lessen the company’s dependence on the declining personal computer market. It will possibly help the company to regain some of the lost market share from rivals like Nvidia (NVDA) and Intel (INTC - Analyst Report).

A study conducted by DFC Intelligence suggests that the global gaming market will increase from $67.0 billion in 2012 to $82.0 billion in 2017. Further, IDC estimates that there will be 257 million active consoles worldwide by 2015. These estimates suggest that there are opportunities for companies like AMD to increase their stakes.

The gaming hardware market is currently reeling under competitive pressure from emerging social network sites and competing hardware platforms such as smartphones and tablets. However, we expect the hardware sales to increase because of the upcoming new consoles. Since AMD’s products are being used in all the major platforms, it should see good growth from the segment.

AMD is the world's second-largest maker of microprocessors. In the last reported quarter, AMD’s top-line numbers were better than its guidance, supported by new products and strong mobile design wins. Also, the company’s bottom line beat the Zacks Consensus Estimate.  

Although the decline in PC demand may affect results in the upcoming quarter, increased game console wins, launch of new products, new offerings and good execution from the company can help win new customers.

Currently, AMD holds a Zacks Rank #3 (Hold).

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