Sector Snap: Chips rebound, but AMD hits new low

Chip stocks on Thursday staged a modest recovery from the previous day's decline, but Advanced Micro Devices Inc. hit its lowest price in 16 years ahead of its quarterly report, and TriQuint Semiconductor Inc. fell after reducing its second-quarter guidance.

Shares of AMD, the No. 2 microprocessor maker behind Intel Corp., fell 11 cents, or 2.2 percent, to $4.95 in afternoon trading. The stock earlier changed hands at $4.75, its lowest trade since 1992. The company is scheduled to report its quarterly results next Thursday.

Elsewhere, TriQuint shares lost 62 cents, or 10.7 percent, to $5.16. The stock began its descent in aftermarket trading Wednesday after the Hillsboro, Ore.-based maker of radio frequency chips preannounced quarterly income of 3 cents to 4 cents per share, less than the company's previous forecast of 5 cents to 7 cents per share and below Wall Street projections.

Analysts remained optimistic on TriQuint, saying its lackluster performance was due to delays in ramp-ups of new products, and the company's third-quarter guidance appears solid.

"Executions challenges _ more external than internal _ sap TriQuint's momentum," Lehman Brothers analyst Jeffrey Kvaal wrote in a note to clients. The analyst, who rates TriQuint "Neutral," noted that the company has a healthy 35 percent gross margin.

"While TriQuint's second-quarter miss was disappointing, we view it as a modest near-term setback and think that the bigger picture for TriQuint still looks attractive," Stephens Inc. analyst Stephen Ferranti wrote in a note to investors. He predicted the company would perform well in the second half of the year.

Meanwhile, shares of Eagle Test Systems Inc., Applied Materials Inc. and KLA-Tencor Corp. rebounded after Banc of America began coverage of the chip equipment makers at "Buy." Eagle Test Systems added 29 cents, or 2.9 percent, to $10.48, while Applied Materials rose 46 cents, or 2.6 percent, to $18.31. KLA-Tencor advanced $1.11, or 3 percent, to $38.71.

Also in the chip equipment sector, Banc of America initiated coverage of LAM Research Corp., Verigy Ltd., Varian Semiconductor Equipment Associates Inc. and Kulicke & Soffa Industries Inc. with "Neutral" ratings, and Novellus Systems Inc. with a "Sell" rating.

LAM Research added 35 cents to $34.10, while Varian sank 46 cents to $31.52 and Kulicke & Soffa added 7 cents to $6.47. Verigy lost 55 cents, or 2.6 percent, to $20.90, and Novellus added 13 cents to $20.05.

In afternoon trading, the Philadelphia Semiconductor Sector Index was up 3.86 to 348.36, with 15 of its 18 constituents advancing. The index lost more than 15 points the day before, as chip equipment stocks including Mattson Technology Inc., Applied Materials and KLA-Tencor sank after Mattson preannounced weak quarterly results.

Mattson shares added 7 cents to $4.59 Thursday afternoon.