Sector Snap: Chips fall as AMD writes down $880M

Semiconductor stocks fell dramatically Friday as investors contended with not only a sharp decline in the broader market, but a large writedown at Advanced Micro Devices Inc.

AMD, the No. 2 microprocessor maker behind Intel Corp., on Friday disclosed it would write down the value of its handheld and digital television units by $880 million in the second quarter. The company acquired the units when it bought ATI Technologies for $5.6 billion in 2006.

AMD, which in April announced it would cut 10 percent of its work force, also said it would record $32 million in restructuring charges for employee severance.

Shares of the company fell 19 cents, or 3.8 percent, to $4.77 in afternoon trading. The stock earlier changed hands at $4.60, below a 16-year low of $4.75 set the day before.

Meanwhile, the Philadelphia Semiconductor Sector Index fell 6.15, or nearly 2 percent, to 343.03 as the Dow Jones industrials slipped below 11,000 for the first time in two years. Investors were spooked by oil's climb to a record near $147 a barrel and speculation the government may need to bail out struggling mortgage financiers Fannie Mae and Freddie Mac.

Elsewhere in the semiconductor sector, shares of Amkor Technology Inc. fell $1.19, or 12.5 percent, to $8.34 after the chip packaging and testing services company reduced its second-quarter revenue guidance below analyst estimates. The company cited production disruptions stemming from technology issues at its Philippines facilities.

Separately, a Citi analyst downgraded Applied Materials Inc. to "Hold" from "Buy." Brian K. Lee said that recent checks indicate orders for chip equipment makers are declining between 5 percent and 10 percent in the third quarter from the previous quarter, due in part to a production slowdown at Samsung.

Lee also removed Applied Materials competitor KLA-Tencor Corp. from his "Top Picks Live" list and lowered his price targets on Novellus Systems Inc., LAM Research Corp. and Advanced Energy Industries.

Applied Materials shares fell 67 cents, or 3.6 percent, to $17.67, while KLA-Tencor slipped $1.25, or 3.2 percent, to $37.49. Novellus shares fell $1.03, or 5.1 percent, to $19.02, as LAM Research lost $1.91, or 5.6 percent, to $32.17. Advanced Energy fell $1.57, or 10.9 percent, to $12.82.