Don I took my profits on KLIC when it became apparent that the SOX would not break through upside resistance. I will be looking for another fall to perhaps 575 or so now on that index. We have the knowledge that all the FED's rate cuts (including one that will come on June 25th) weighing against the fact that no recovery is yet evident to keep us in a short term trading range. Unless the SOX recovers early next week to close well above 700 I think this upcoming sell off could be even deeper than 575 before buyers step back in full strength. I am going to share a couple press releases with the readers of the thread if they are interested:
Chip, PC Makers Give Mixed Signals on Recovery
By Peter Henderson
SAN FRANCISCO (Reuters) - Two bedrock technology industries, microchip and PC makers, are giving conflicting signals about the prospects for quick recovery in the sector, a riddle that bears on whether the wider economy will pick up.
Chipmakers say the worst may be over, while computer companies say foreign markets for computer systems are going soft. The question is whether signs of a recovery are just wishful thinking or the real thing.
``What we are seeing is continued deterioration,'' Carly Fiorina, the chief executive of computer and printer maker Hewlett-Packard Co.(NYSE:HWP - news) said this week. ``We are now becoming more convinced that this is a global IT slowdown, which will last for some time.''
Andy Bryant, the chief financial officer of Intel Corp. (NasdaqNM:INTC - news), the world microchip leader, said on Thursday: ``There is not a disaster any place; it's just routine business.''
There is no clear consensus from industry leaders or from Wall Street.
MIXED SIGNS, EYES ON THE U.S.
Many analysts look at a few key issues. Those include improved, lower inventory levels for computer and chip makers and whether any events on the horizon will stimulate demand.
Some also divide the world into the United States and the rest, arguing that the globe's leading economy stumbled first and should show the first signs of recovery.
There is also a more basic question -- will the recovered technology world boom or just chug along?
``What we are seeing is customers becoming more discriminating,'' said Fiorina, adding that customers would only buy technology that clearly would improve profits.
``We are doing exactly the same thing,'' she said.
Brian Halla, chairman, president and chief executive of National Semiconductor Corp.(NYSE:NSM - news), said cell phone and personal computer makers had burned through excess inventory but would not order more parts before they needed them.
He hoped Microsoft Corp.'s (NasdaqNM:MSFT - news) new operating system, Windows XP (news - web sites), would boost PC sales after launch later this year.
``I'd say a real bounce would depend on maybe Microsoft, the new operating system really stimulating a lot of PC sales or some dramatic improvement in GSM (mobile phone) handsets,'' he said in an interview.
Intel's Bryant said his company is at a new lower level, not that markets were improving. He said on Thursday he wasn't losing any sleep that Intel's sales would fall outside the range of expectations the company set in March, albeit at the low end of a range of between $6.2 and $6.8 billion. And Intel would increase its own inventories because business is usually better in the second half of the year, he said.
But how does Intel, or anyone for that matter, know that business will improve in the second half of the year?
``Historically the second half has been better than the first half,'' said Dresdner Kleinwort Wasserstein analyst Nimal Vallipuram. ``Has Intel seen anything in the past one month to prove that point? The answer is no.''
``We are playing on the seasonality, and the seasonality has stood for years and years and years,'' he added. ``And I see no reason the seasonality should go away.''
But computer makers painted a troubling picture of world markets. Network computer maker Sun Microsystems Inc.(NasdaqNM:SUNW - news) and Hewlett-Packard have both said U.S. sales were weak but that foreign markets were the ones deteriorating more than expected.
ANALYSTS DIVIDED ON RECOVERY
Analyst Roger Kay said his technology research firm, International Data Corp, expected PC unit sales to decline this year in the United States for the first time, by 6.3 percent. That did not conflict with Intel view of the world, he argued, because Intel has said business is at a new low level.
``That means things could have been better, and they aren't,'' he said.
Ashok Kumar, an analyst at U.S. Bancorp Piper Jaffray, said PC growth would be constrained in a research note on the Intel mid-quarter report, entitled ``False Dawn?''
``The company said Q2 is the low-water mark,'' he said. ``The original expectation is that Q1 would be the low-water mark. So now the question is, is this the bottom or are we going to hear next that Q3 is the low-water mark?''
But Salomon Smith Barney analyst Jonathan Joseph, one of the most bullish on the chip sector, said the first sign of a recovery was that companies met expectations.
``The early stages of a cyclical bottom are described by essentially companies beginning to hit guidance,'' he said.
The factors in a recovery are moving targets, too, said Bear Stearns analyst Andy Neff.
``Inventories are too high when you think demand is too low,'' he said, by way of illustration.
The current downturn was exacerbated because companies built up supplies on fear of shortages and expectations of growth -- growth which stalled out at the end of last year.
dailynews.yahoo.com
RtS |
