Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19
Silver Is Cheap – And Getting Cheaper - 7th Oct 19
Stock Market Back to Neutral - 7th Oct 19
Free Market Capitalism: Laughably Predictable - 7th Oct 19
Four Fundamental Reasons to Buy Gold and Silver - 7th Oct 19
Gold and Silver Taking a Breather - 7th Oct 19
Check Engine Warning Light ECU Dealer Diagnostic Cost - Land Rover Discovery Sport - 6th Oct 19
Natural Gas Reloads For Another Price Rally - 6th Oct 19
Understanding and Purchasing different types of Plastic Building Materials Online - 6th Oct 19
Craig Hemke: Ignore the Elliott Wave “Buffoons” Calling for a Gold Crash - 6th Oct 19
Stock Market 6 Month Trend Forecast Conclusion - Video - 6th Oct 19
The True Causes Behind the Yield Curve Inversion and Gold - 5th Oct 19
Strategies on how to be a Successful CFD Trader - 5th Oct 19
Gold Stocks Correction Underway - 5th Oct 19
Climate Change When the Levee Breaks - 5th Oct 19
Federal Reserve Bank ‘Guarantees’ Dow Will Not Sink Below 26k - 5th Oct 19
The Russell and Transportation Tell A Completely Different Stock Market Story - 4th Oct 19
Confidence Drives the Economy and Trump’s Trade War Is Killing It - 4th Oct 19
ADL Predicts Crude Oil Prices Will Fall Below $40 - 4th Oct 19
Investing Money? Why You Need a Reputable Accountant - 4th Oct 19
Stumbling Manufacturing and Rising Gold – Now or Later? - 4th Oct 19
Silver Eyes Fourth Quarter Rebound - 4th Oct 19
Gold Price Forecast to Exceed $10,000/Ounce - 3rd Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Who’s Right About The Tech Stock Sector?

Stock-Markets / Tech Stocks Apr 30, 2009 - 11:45 AM GMT

By: Uncommon_Wisdom

Stock-Markets

Best Financial Markets Analysis ArticleTony Sagami writes: Intel wants you to believe that its PC business bottomed out in the first quarter and is about to return to normal.

“We are seeing signs that a bottom in the PC market segment has been reached. I believe the worst is now behind us from an inventory correction and demand level adjustment perspective,” Chief Executive Paul Otellini said during a recent conference call.


If Intel is right, this would be a great time to invest in any parts of the PC food chain.

Intel, however, couldn’t be more wrong, and please don’t get sucked into its self-serving optimistic hype.

Here’s why:

Writing on the Wall #1: First of all, Intel’s quarterly report was a disaster. It reported a Q1 profit of $647 million, or 11 cents a share. That’s down from $1.4 billion, or 25 cents a share, compared to the same quarter a year ago.

The reason for the big drop in profits is simple — sales have tanked. Intel saw its revenues fall to $7.1 billion from $9.7 billion in the last 12 months. Some $2.6 billion of sales went ‘pfffffft’ in the last year.

Microsoft's quarterly profits dropped 32 percent — a first in the company's 23—year history.
Microsoft’s quarterly profits dropped 32 percent — a first in the company’s 23–year history.

Writing on the Wall #2: Microsoft knows a thing or two about the computer business. Its quarterly profits plunged by 32 percent, but for the FIRST time in its 23 year history, Microsoft didn’t report rising quarterly revenues. The reason is simple — business stinks.

“We are planning essentially for the economy to contract. That may take two, three, four years, partly depending on government policy to ease some of the pain. Then we will see growth again,” said CEO Steve Ballmer.

“We witnessed a deterioration in spending levels through the third quarter. In the fourth quarter, we expect the overall spending environment to remain difficult,” said CFO Steve Liddell in a company statement.

Writing on the Wall #3: The government made a huge commitment to become a major player in the semiconductor business, but it may now wish it wasn’t.

I say that because 60 percent of China’s semiconductor manufacturing capacity was sitting idle in the first quarter.

To put that into perspective, the Chinese chip industry was humming along at a 92 percent utilization rate in 2004, and according to industry watcher iSuppli, that’s the lowest capacity utilization numbers it has ever seen since it started tracking the market in 2000.

Writing on the Wall #4: Taiwan Semiconductor, the largest semiconductor manufacturer in the world, saw its Q1 sales drop 55 percent from the same period a year ago and a painful 39 percent from the fourth quarter of 2008.

Writing on the Wall #5: Taiwan’s United Microelectronics, the world’s second-largest chip maker, reported its second consecutive quarterly loss recently. Why? Because the global demand for chips has fallen off a cliff.

Asia's semiconductor sector is getting slammed by slowing sales.
Asia’s semiconductor sector is getting slammed by slowing sales.

Writing on the Wall #6: Samsung Electronics, the world’s largest maker of memory chips and LCD screens, reported a 72 percent decline in profits. Like Microsoft, Samsung doesn’t expect a rebound anytime soon.

“It is still premature to expect the global economy as well as the consumer demand recovery in the near term,” said Robert Yi, the company’s vice president.

Writing on the Wall #7: Hynix Semiconductor, the second-largest computer-memory chipmaker, recently reported a sixth consecutive quarterly loss.

Prices of computer-memory chips declined 48 percent, and flash memory chips (used to store songs and data in portable musical players and digital cameras) fell by 20 percent in the last 12 months.

Who Do You Trust?

Wow, those are certainly different outlooks from Intel’s optimistic forecast. Who should you believe?

Intel, who says that the worst is behind us and the semiconductor future is so bright that it needs sunglasses?

Or the unified voices of concern from the six Chinese, Taiwanese, and South Koreans?

Somebody is dead wrong and if you ask me, there is no question that Intel is the company that is jerking your chain.

That certainly has some important investment implications. First of all, it means you should use the recent rally and sell every piece of the PC food chain that is in your portfolio — such as Dell, Microsoft, Intel, Micron Technology, AMD, Phoenix Technologies — before they get clobbered even more.

In fact, if you’re an aggressive investor, I believe you could ’short’ most of the stocks in the PC food chain and make a bundle.

Another option would be to buy ProShares Ultra Short Semiconductors (SSG), which is designed to deliver twice (200 percent) the inverse of the daily performance of the Dow Jones U.S. Semiconductors Index.

If the business of Intel and its chip-stock buddies continue to deteriorate, SSG could soar in value.

Shorting stocks and buying inverse ETFs, however, is not for everyone, so don’t rush out and short any PC stocks without doing your homework. It could, however, be one of the most lucrative financial moves you could make this year.

Regards,

Tony

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.

Uncommon Wisdom Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules