I could have saved myself this 15% drop had I not added Intel to my portfolio tracked by "Globes" last week and waited until today. But how could anyone have predicted that this prolific company would have found itself in what I define as the "perfect storm" that raged across the markets over the last three days?
Two first rate analysts from Bank of America and JP Morgan downgraded their rating for Intel almost simultaneously to "Neutral" from "Buy", at around the same time as the release of poor macroeconomic data in the US. That was all it took to trigger the ensuing panic.
The bad timing at play here created the erroneous impression that the analysts were unanimous in their view that Intel was down on its luck, but this is far from the truth. Against these two analysts, who I imagine never dreamed that their downgrades would trigger a $23 billion avalanche in Intel's market cap, there were others equal in seniority who actually reiterated their recommendations.
But in times like these, with panic so rife, people take more notice of downgrades and less of reiterated "Buy" ratings, such as the one from Citi, which on Friday added Intel to its list of top technology stocks for 2008, or Goldman Sachs which reiterated its own "Buy" rating for Intel, which is still a member of prestigious Conviction List, alongside Google Inc. (GOOG), Research In Motion Ltd. (RIMM), Oracle Corp. (ORCL), and Hewlett Packard Co. (HPQ).
In general, every time panic has swept through the markets in recent years for one reason or another, the technology sector was always the one that suffered the most damage. Investors have a misplaced notion, almost an instinct, that the bubble of 2000 is about to resurface once more. Apparently, the trauma of that turbulent period is still very fresh in people's minds, even though eight years have now passed.
This, I feel, is one of the more common errors that investors make, since the euphoria and the heady dreams at the start of 2000, and the pessimism at the start of 2008 and the stability of the technology sector's business today, are as far apart as the distance from here to the moon.
On Sunday evening, Microsoft Corp. (MSFT) founder and chairman Bill Gates took the podium in Las Vegas for the final time, and of the companies I follow, SanDisk Corporation (SNDK) unveiled a new range of flash-based products. Gates, who has traditionally opened this mega electronics show since 1994, said this would be his last time.
The announcement was, in essence, the prelude to his full retirement from the company he founded, following which he will focus his efforts largely on philanthropy, through, among other things, the development of software as a tool for improving education and healthcare worldwide.
Gates told his Las Vegas audience, among other things, that this year's Olympic Games in Beijing will be the first major sporting event ever to be aired live over the Internet. This will take place on a site to be jointly operated by Microsoft and TV network NBC, called NBC Olympics.com. It will launch its coverage at 8:00 am Beijing time, on August 8, 2008, with the airing of the opening ceremonies, following which there will be an estimated 3,000 hours of live coverage plus reruns.
Speaking generally, the upcoming Olympic Games will be the first test of what is known as Internet protocol television [IPTV], the telephone companies' rival platform for video content relay to that offered by cable and satellite television carriers. If anyone still had any doubts as to the likelihood of massive investment in broadband infrastructure this year, Bill Gates' pronouncement on Sunday night laid all further speculation to rest. No telecommunications provider will want customers watching live coverage of the final of 100 meter dash to see transmission break up seconds before the athletes hit the finishing tape, as often happens when watching video content online today.
Microsoft, it goes without saying, will be supplying a lot of the infrastructure software for the various set-top boxes and end devices, while in the hardware department Cisco Systems Inc. (CSCO) will be clocking up extra sales of the corresponding telecommunications equipment.
Given that SanDisk chose the Las Vegas show to showcase its new 12Gb flash card for use by handset manufacturers, I imagine that anyone who read the recent "Globes" interview with chairman and CEO Eli Harari will have no doubt as to where the company believes it is heading. It is second place after Apple Inc. (AAPL) in music players, it is the world leader in flash cards for handsets, and it aims to become the market leader in flash-based solid state drives [SSD].
Sandisk no longer perceives itself as another memory chip company in the same stable as Micron Technology (MU), Spansion Inc. (SPSN), Qimonda AG (QI), and others. Perhaps investors will finally realize now, with its quarterly results just three weeks away, that SanDisk's margins on sales of end products - players and flash cards - did not disintegrate as was thought when its share hit its recent low.
With the Olympics now just a few months off, one of the hottest developments to be presented in Las Vegas this year is the ability to view downloaded video content on advanced television screens, as well as high-speed wireless relay of such content between domestic appliances at home. Netflix Inc. (NFLX), for example, which offers an online library of movie, television, and other filmed entertainment titles on DVD which it ships to customers' homes, unveiled an agreement with Korean consumer electronics company LG to produce set-top boxes that stream movies from its online catalog to high definition television sets.
SanDisk is offering a solution developed in Israel called TakeTV, which enables users to download films on to a USB style-drive, and view them on a TV screen by pushing a button on the device. SanDisk also has a content site of its own, and is likely to announce additional agreements with content providers.
As for wireless communications, Metalink Ltd. (MTLK) is due to unveil new products and/or collaboration agreements with manufacturers of set-top boxes and/or advanced home television systems in Las Vegas. It will face stiff competition for this from Atheros Communications Inc. (ATHR), Broadcom Corp. (BRCM), and Marvell Technology Group (MRVL), which has already unveiled its own wireless chip which, so it claims, is the fastest on the market.
Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.