- The technology sector had a horrible week last week with bad results from all of the bellwethers and benchmark indices that fell around 4% in the last 4 sessions of the week.
- This was pretty much across the board from PC makers to semiconductor companies to software and internet companies.
- The message is clear: The economy remains weak and as a result Q4 is going to sub seasonal in terms of the holiday selling season experienced by most participants.
- The market was worried about this but clearly there had been some hope that Windows 8 and the smartphone market would pull the industry out of its current slump.
- Admittedly, I had been in the hoping camp as the fundamentals of Windows 8 point to an OS that offers a huge jump in functionality which should ignite some interest in consumers when it becomes available on Friday.
- But alas, confidence has taken another hit. No inventories have been built and everyone seems to be expecting that consumers will ignore Windows 8 until 2013.
- For most of last week, estimates were cut, economic data depressed everyone and valuations corrected.
- However, one thing stands out. If there is some interest from the consumer, then everything is going sell out very quickly.
- This will lead to rush orders, a demand spike and inventory building all at the same time.
- Before you know it, the semiconductor sector will have rallied 20% and we will back on an upwards tack.
- Question is: when will this happen? It is very difficult to tell but the time to get interested is when stocks stop reacting negatively to bad news.
- Texas Instruments guided very badly for Q4 last night but the shares hardly moved in after hours trading which is enough to make me raise my eyebrows.
- Texas forecast Q4 revenues / Adj. EPS at $2.83bn-$3.07bn / $0.30-$0.37 compared to consensus at $3.22bn / $0.37.
- This is a reflection of customers refusing to build inventory into any recovery until there is much stronger evidence of a demand pick up.
- However the shares were almost unchanged in late trading last night strongly implying that the weakening in sentiment from the bellwethers last week had prepared the market for bad guidance.
- This makes we wonder whether a weak Q4 has now been priced in and whether we should again be looking for the upturn.
- It is going to take a few more results like this to convince me, but I am beginning to wonder about a broad brushed technology rally in January 2013.
- For now, it is all going to be about Apple with new products being launched tonight and consumers queuing around the block to buy its products.
- I see a comfortable 10% rally in Apple before year end and it is the only technology stock that I hold at the moment.
Blog Comments
tatilsever
October 23, 2012 at 1:39 pm
Maybe, the rumors that TI is selling its mobile chip arm to Amazon is putting a floor to the stock. Traders may not be as forgiving to the next company guiding down.
windsorr
October 29, 2012 at 11:41 am
possibly…although that rumour frankly has little credibility!