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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: SI User who wrote (20664)	9/15/2006 9:32:57 AM
From: Gottfried	Read Replies (2) \| Respond to of 25522

Dr., that article just points out higher inventories. No actionable info :) Reality Check September 15, 2006; Page C1 Investors are hoping the technology sector's recent troubles are behind it. But judging from the dust gathering on some tech-company shelves, there might be more pain to come. When it issued results in August, semiconductor-equipment maker Applied Materials gave a cautious forecast for its business and said it was hearing from chip makers that inventory was picking up in the personal-computer market. Last week, National Semiconductor reported a slowdown in orders and said it would bring down inventory levels. And this week, electronics retailer Best Buy reported results that generally pleased Wall Street, except for one detail: Inventories increased more than sales. [aot] A quarterly survey of chief financial officers released this week by Duke University and CFO Magazine suggests a wide swath of tech companies are seeing rising inventory levels. On average, tech CFOs expect their inventory levels to be 2.6% higher in the next year than they were in the past year. Only construction companies, which have been getting hit hard by the slowdown in housing, expect a bigger increase in inventories, points out Duke professor John Graham. It's a sign that tech companies "are expecting corporate spending to slow and consumer demand to stay low," he says. If they are facing a slowdown, the quick tech companies will throttle back production until they've worked down their inventory. Today's report on August industrial production and capacity utilization may provide a signal on whether that's starting to happen. Tech output has been going gangbusters -- it's up more than 22% from a year ago, even more than oil and gas drilling. One bright spot for the sector is that since a nadir in mid 2002, tech companies have been running at fuller capacity, which helps profits. In July, they were using about 78% of capacity -- the most in five years, though far below levels reached during the height of the 1990s boom. The sector also seems to be enjoying more hard-headed realism than it displayed in the 1990s. Sanford Bernstein strategist Vadim Zlotnikov notes that tech companies were especially cautious when they reported second-quarter results. Strange as it sounds, they may be better prepared for a slowing economy right now than others. Write to Justin Lahart at justin.lahart@wsj.com