As Market Despairs, Second-Tier Techs Fall Further Behind

By Douglas A. McIntyre Published Feb 14, 10:04AM EST

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The fear of a slowdown in tech spending has done a great deal of damage to big tech stocks. Over the last three months Amazon (AMZN) is down 3%, Intel (INTC) is off almost 20%, Hewlett-Packard (HPQ) is down 12%, and Cisco (CSCO) is of 20%.

The real damage has been done to the tech companies which sit in the second tier. These firms have weaker balance sheets, smaller market share, and thinner margins. Wall St. obviously believes that they will have more than their share of earnings problems and those with weak balance sheet could be in deep trouble.

Shares in AMD (AMD) are off over 40% over the last 90 days. The company is still experiencing slow revenue growth and it balance sheet has $5 billion in debt. Its graphic chip business only broke even in the last quarter compared with Nvidia (NVDA) which posted a large profit. AMD is still at risk for having to raise more money.

Nortel (NT) crosses swords with Cisco in some markets. The Canadian company says it will aim toward providing 4G gear for the next generation of wireless deployments. The company has had virtually no revenue growth over the last four quarters and operates on thin margins. The company has $3.8 billion in long-term debt. No wonder the shares are down over 35% during the last quarter.

Sun Microsystems (JAVA) is up against IBM (IBM) and HP in the server market. Its shares are off over 25% during the last quarter. With almost no operating margin, and single digit growth, the company really does not have anywhere to go to find new business.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.