Sector Snap: Chip stocks mostly decline

Shares of AMD, which is the world's second-biggest computer processor company behind Intel Corp., fell 66 cents, or 12.5 percent, to $4.64 in afternoon trading.

After the closing bell Thursday, AMD reported an adjusted loss of 60 cents per share--worse than analysts polled by Thomson Financial expected. The company also said Chief Executive Hector Ruiz was being replaced by President and Chief Operating Officer Dirk Meyer.

In addition, AMD said it plans to divest its units that make chips for cell phones and digital television sets.

In response, Goldman Sachs analyst James Covello lowered his price target to $3.50 from $5 and kept his "Sell" rating for the stock, saying the CEO change is positive but AMD has "significant challenges" ahead of it.

"Intel's solid Q2'08 results vs. AMD's is evidence that AMD's market share continues to deteriorate and it is having a difficult time closing the competitive gap. We expect this gap to widen exiting 2008 and into 2009 when Intel rolls out Nehalem," he said.

Nehalem is the code name for a processor for high-end workstations that Intel is slated to launch commercially by the end of the year.

Shares of Intel dipped 7 cents to $21.92.

Meanwhile, shares of flash memory chip maker SanDisk Corp. fell 49 cents, or 2.7 percent, to $17.63.

Thomas Weisel Partners analyst Heidi T. Poon said in a note to investors that sluggish demand and declining prices present a risk to her second-quarter revenue estimate of $882.5 million and adjusted earnings estimate of 10 cents per share.