Now Can We Say We're At Bottom?

Second Opinion: Now Can We Say We're At Bottom?
Follow The Tea Leaves In The Semiconductor World

By John C. Dvorak | 6 May 2009

Berkeley, Calif. (MarketWatch)— One interesting thing you should know about the tech business is that because everything is really about the chips that go into the devices, the people who make those chips usually have a heads-up on changing trends. This means that when they say they think things have bottomed out, they are usually right. This doesn't mean things won't bottom out again, but it does mean something has changed.

As those of you who read this column know, I think there was a market bottom last November and people who invested then are probably in good shape, or at least not getting killed any more. Numerous issues are up substantially. Good things are playing out as the chip industry sees an uptick and IT departments ramp up demand. So will the upward trends continue?

If you are to believe the semiconductor folks, the trend should continue and will do so until they all start moaning again. This opinion is plastered all over the trades as well as the Wall Street Journal, where two stories emerged over the past few days. Taiwan-based manufacturers Acer, Quanta and Compal say that their recent profits fell, but all of them also see business picking up.

These comments confirm earlier comments by Intel (INTC) that the market for chips bottomed out in the first quarter. Then came more relatively good news from more semiconductor folks like Germany's Infineon Technologies (IFNN.Y) and Taiwan's Nanya Technology Corp. Others on the bandwagon are Texas Instruments (TXN) , TSMC) , and STMicroelectronics (STM)— although their enthusiasm reflects caution— and much of the enthusiasm stems from the fact that the decline in sales is slowing, NOT that things have actually turned up.

But there are some out-and-out optimists cropping up such as Craig Berger, analyst for FBR Capital Markets. He sees growth in the PC business, reporting that Asian chip distributors are seeing a 'serious' uptick in demand. And, according to an EEtimes report, Berger thinks that perhaps Intel's 'conservative' estimates for the second quarter may be off quite a bit[!?!] He thinks they may grow revenue by 3 to 4%. This could give both the stock and the market as a whole an unexpected boost.

Combine this with the pent-up demand factor I cited in a previous column and research from CDW that indicates nearly one-third of small business IT departments intend to increase their IT budgets in the next six months, and we have an interesting situation developing. Now, with that all said, April 2001 was the last time a bull market emerged after a dot-com crash the year before. The recovery from the bust may have continued but for an incident on Sept. 11 of that year[!?!]

The incident changed a number of industries and did little for consumer confidence. The tech scene essentially went flat for the next eight years. If one was to be superstitious or into cycles, you'd note that the attack of Sept. 11 took place eight years after a botched attempt on the same WTC in 1993. We are at another 8-year juncture.

Another bull market could be thwarted again by another attack or any other number of factors. But right now I think things look good.

ߧ

Normxxx    
______________

The contents of any third-party letters/reports above do not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of any message or post by normxxx anywhere on this site is not to be construed as constituting market or investment advice. Such is intended for educational purposes only. Individuals should always consult with their own advisors for specific investment advice.