Technology shares are being hit hard across the board as PC sales disappoint and many are left to lower their exposure to the industry. It appears that companies will be slow to make the jump to Windows 8, and this is not at all surprising to us as we know of companies who just recently made the jump to the last Windows operating system prior to this roll out. Those entities will not be making the jump after just finishing their transition and it appears that more and more companies are willing to wait as there are fewer and fewer new features added on these roll outs. If it was a transition from DOS to Windows each time with significant improvements made, then yes we could see a rush to buy new hardware and software, but that is not the case. We believe that this trend continues to future roll outs, just as it has been a constant over the past few rollouts.
We will not have any economic news out today, the first set will hit on Wednesday.
Looking at Asian markets we see markets are mixed:
All Ordinaries - down 0.63%
Shanghai Composite - up 0.21%
Nikkei 225 - up 0.09%
NZSE 50 - CLOSED
Seoul Composite - down 0.12%
In Europe markets are slightly higher:
CAC 40 - up 0.19%
DAX - up 0.05%
FTSE 100 - up 0.22%
OSE - down 0.03%
It is becoming ever more obvious that slumping PC sales are taking their toll on the technology industry as a whole. The new operating system rollout has not given the industry a large enough pop and we are seeing companies lower tech spending in order to meet their bottom line numbers. Advanced Micro Devices (AMD) is the latest to get hit on Friday, but we knew this was coming. Also, and probably of more significance is the fact that they were not the only company reporting that slumping PC sales were hurting company specific sales at the end of last week. Investors saw AMD shares slump $0.44 (16.79%) to close at $2.18/share on volume of 110.1 million shares after the company announced disappointing quarterly results and weak guidance for future quarters. We must also mention that the company confirmed the layoff rumors that have been making the rounds recently, but the good news is that the company indicated that they planned to lay off only 15% of the workforce and not the 20-30% we had heard earlier. It is saddening to hear of those losing their jobs, but we are glad that the number is only half as much as we feared only a few days ago.
Marvell Technology (MRVL) was another name which saw their shares head lower after numerous analyst downgrades following disappointing earnings and the company's Chief Financial Officer departing. After one gets past the exit of the CFO and focuses on the operational results which drove shares lower the focus is on the PC business. Based off of the earnings results so far this quarter, it is hard to see when spending will pick up on computers as the forward guidance is vague and in many cases not helpful at all to piece together the bigger picture. Marvell shares have been hit quite hard recently and saw shares fall $1.26 (14.31%) to close at $7.57/share on Friday. The trading on Friday set a new 52-week low for the shares and the one good thing going for the stock is that now many analysts have taken off their buy ratings, thus giving them room to upgrade the shares at some point in the future based on valuation. Analysts generally remove buys at the bottom and put in place sell opinions, so maybe this is a contrarian play based off of that alone.
It is not all doom and gloom in the technology industry, even after the huge down day on Friday. SanDisk (SNDK) saw their shares rise $1.16 (2.71%) to close at $44.02/share after the company reported results which were much better than analysts were expecting. The company beat on both the top and bottom lines, but did the big surprise on the EPS numbers. They also beat on the revenues, but that was less impressive (although we would like to point out that many companies over the past year have been unable to meet these numbers, so it is something to take note of). The company received two upgrades on Friday which aided in their move upwards.
Riverbed Technology (RVBD) was a bit of a surprise to us on Friday as the company reported earnings which beat analysts' forecasts and issued guidance for next quarter which was rosy. The news caused at least one brokerage to raise their price target on the company's shares. This is just further evidence that we are in a stock picker's market and the analysts know it. We would expect that if a company can beat estimates in this market or has the conviction to issue bullish guidance then the analysts will follow with bullish opinions. Fail to give them reason to be bullish and they will remain neutral or even go negative - they are riding momentum, just as readers should.
For our more conservative readers we would like to recommend watching American International Group (AIG) here. The shares pulled back on Friday, closing at $35.70/share after falling by $1.51 (4.06%) on volume of 30.3 million shares. The metrics are getting better for the company along with the balance sheet and income statement and investors should see a dividend stream in the near future. Looking at where the company is now and how much the story has improved, buying on weakness appears that it would be a prudent course of action.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.