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Motherboard Malaise Trips Tech Stocks

A report on sluggish demand in Asia rocks the rally.

Tech stocks ended Friday's session in retreat, following a bearish analyst note about plunging demand for PC motherboards.

The news took a toll on virtually every player in the PC ecosystem, pressuring shares of

Intel

(INTC) - Get Intel Corporation Report

,

Advanced Micro Devices

(AMD) - Get Advanced Micro Devices, Inc. Report

,

Dell

(DELL) - Get Dell Technologies Inc Class C Report

and

Micron

(MU) - Get Micron Technology, Inc. Report

, among others.

The

Philadelphia Stock Exchange Semiconductor Sector Index

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closed off about 2% to remain in its six-week trading range.

According to news reports, Goldman Sachs analyst Henry King released a note that Taiwanese makers of PC motherboards have seen a sharp drop in demand in October, leading him to slash his monthly shipping estimate.

A motherboard is a printed circuit board on which all of a PC's main chips are attached, from the microprocessor to memory chips and power management circuits. A drop in motherboard demand is bad news for the chipmakers whose products sit on the boards, as well as for PC sales in general, since it signals weak end-market demand for computers.

Intel, AMD and Micron were all down at least 3% late Friday. Dell and H-P each slipped more than 1%.

National Semiconductor

(NSM)

and

International Rectifier

(IRF)

, both of which make components for PCs, slid 4.9% and 2.9%, respectively.

The PC market is already under pressure, owing to the delay of

Microsoft's

(MSFT) - Get Microsoft Corporation Report

new Vista operating system, the high PC saturation of the U.S. market and an increasing array of electronic gadgets fighting for consumers' dollars.

In September, industry research firm Gartner

projected that worldwide PC sales in 2006 would total $198.3 billion, down 2.5% percent from the prior year's $203.3 billion. This would mark the first year of negative revenue growth since 2001.

The latest report throws cold water on hopes that PCs might nonetheless turn in a decent holiday sales season thanks to powerful new processors from Intel and AMD. Both companies have promised to have some version of a

microprocessor packing four cores on store shelves for the holidays.