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3 Tech Stocks Facing the Blue Screen of Death

The Post-PC age does not bode well for these aging companies

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Advanced Micro Devices

AMD1 3 Tech Stocks Facing the Blue Screen of Death

5-Year Return: -85% vs. -9% for the S&P 500
YTD Return:
-64% vs. 11% for the S&P 500

In full disclosure, I am not a super bear on the entire old-guard chip industry. I actually just bought into Intel (NASDAQ:INTC) and recently and made my case for the stock here.

However, two of my main reasons for investing in Intel — the nice dividend and the mammoth scale to provide stability — are decidedly lacking from Advanced Micro Devices (NYSE:AMD).

AMD didn’t even crack the top 10 of semiconductor market share with a mere 2.1% reach, according to a March report from industry analyst iSuppli — compared with a mammoth 15.6% share for Intel in the top spot.

Furthermore, AMD doesn’t pay a penny in dividends. So much for stability there.

AMD isn’t just a sitting duck, of course. Its Hondo mobile processor holds promise, if it can gain traction. However, Intel has the power of scale and dominance, and can keep driving down pricing to punish AMD on the margins, even if its products are good. The result is a challenging environment where secular trends are weighing on the business, margins are razor-thin thanks to Intel’s browbeating on prices, and the company is struggling to simply keep its head above water.

Here’s where we get to the biggest problem of all: Right now, AMD actually is operating at a loss and is projected to lose money again in 2013. The company recently unveiled plans to eliminate 15% of its work force, or about 1,800 jobs, to deal with the cash crunch.

It’s a sad state of affairs when you’re a laggard in your sector, the sector in general is declining and you don’t have a significant cash cushion should the tough times continue.

I wouldn’t mess around with AMD at all. There’s a very good chance that this stock won’t be around at all in the next year or two.


Article printed from InvestorPlace Media, http://investorplace.com/2012/11/3-tech-stocks-facing-the-blue-screen-of-death/.

©2014 InvestorPlace Media, LLC

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