Technology stocks advanced last week, providing some support to an
otherwise soft broader market, amid robust oil prices and mixed earnings
results and outlooks in the industrial, health care and financial sectors.
Quarterly results from techs often matched or beat estimates, which in many
cases, had been recently reduced after a proliferation of profit warnings. Of
note, chip companies often led the sector. Yet, Harris Nesbitt's Anbrish
Srinvastava is cautious, saying to CNNMoney that, "We continue to stay pretty
negative on the [chip] group. Estimates have to come down a lot more so it's
tough to look at next year's numbers and say the stocks are looking cheap ...
There's still a lot of excess inventory. Our sense is that this could result
in below seasonal sales in the fourth quarter, which could pressure margins
over the next few quarters." The Wall Street Journal concurs, noting that tech
retailers reported a sluggish back-to-school season and that as tech companies
saw their revenue growth slow, they cut back sharply on orders for chips and
other parts. On the bright side, business spending on tech gear rose 14.8% in
the second quarter from a year earlier, faster than any time in the past 20
years, except for a short period during the 1990s' Internet bubble. Is a new
bust in the making? Amid the uncertainty, Alex Vallecillo of National City
Investment Management tells CNNMoney that chip firms with a niche focus in
growing areas of consumer electronics are probably better bets than chip firms
whose outlook is tied more closely to PCs and servers. Also, Apjit Walia, from
RBC Capital Markets, tells the Internet news service he favors tech sub-
sectors such as graphics, wireless and consumer electronics, which are
benefiting from strong demand. He adds, "Consumer oriented chip companies are
seeing more strength now. The rest of tech is still pretty weak."
High-Tech Monday Update is provided courtesy of Thomson Financial. This
information is believed to be true and accurate; we take no responsibility for
inaccurate information and reserve the right to update our reports. For more
information, please visit our web site at http://www.thomson.com/financial.
SOURCE Thomson Financial Corporate Group
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