This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.
The big semiconductor makers got slammed Tuesday, as the dwindling popularity of the PC further eroded shareholder confidence in a once-booming market.
Leading the big losers was Integrated Device Technology (IDTI), which saw roughly a quarter of its now $3.6 billion market cap get deleted. But the San Jose, Calif.-based procucer was hardly alone.
Advanced Micro Devices (AMD), the Sunnyvale, Calif.-based member of Real Money's watch list of 20 distressed companies, fell 3% in early trading, followed by a 2.5% loss at Intel (INTC) and more than 2% loss at Cypress Semiconductor (CY).
Advanced Micro is in particularly rough shape, weighed down by nearly $2.3 billion in debt that's hardly budged over the past year, despite posting a loss of about $485 million in 2015.
And $160 million in annual interest payments required to service its debt obligations is certainly not helping get out of that bind.
Wall Street was particularly disappointed when Advanced Micro posted its fourth-quarter earnings last week, missing analyst sales forecasts by 8%, based on Bloomberg consensus data.
CFO Devinder Kumar pointed to a cooling market for PCs, which has been especially sharp in China, where Advanced Micro has large operations. (The company operates manufacturing plants in China, Malaysia and Taiwan and 75% of revenue is generated by international sales, based on its last quarterly filing with the SEC.)
And the PC market is expected to further recede this year, CEO Lisa Su said on last week's earnings call.
"So if you look at the current market projections, it's somewhere in the low single digits," she said. "I think if you were to talk to the customer side, it might go from low single digit to mid-single digit."
Advanced Micro has noted that smaller devices, which the industry labels as "small form factor devices," have placed the traditional market for PC semiconductors in jeopardy, and could pose a risk as the industry develops.
"A large portion of our computing and graphics revenue is focused on consumer desktop PC and notebook segments, which have and continue to experience a decline driven by the adoption of smaller form factors and increased competition," the company noted in its last quarterly filing. "As consumers adopt new form factors, have new product feature preferences or have different requirements than those consumers in the PC market, PC sales could be negatively impacted,"
Advanced Micro is rated a D by TheStreet's Quant Ratings service, with a Sell recommendation. TheStreet's analysts base their recommendation on "poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."
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