How the Wise Heads Missed the Tech Rally

Excuse me for being fixated, but we are seeing some classic misdirection plays on tech in both the conventional media and Wall Street research, and in both cases it is pretty shocking, because the entities putting out the misdirection are the best: the Financial Times and Goldman Sachs -- the gold standards, for heaven's sake.

This morning's Lex column, always an FT must-read, talks about how "early signs from the reporting season," about tech, "suggest that it is less resilient than has been hoped."

The evidence? Dell (DELL - commentary - Trade Now) and Sun Microsystems (JAVA - commentary - Trade Now). Those are the two examples of the lack of resilience. Hello?

Sun, the FT mentions, "reported a larger drop in sales than expected. The server-maker continues to lose money as companies cut spending." Wait a second: As the FT mentions, it is being acquired by Oracle (ORCL - commentary - Trade Now). Can you imagine the turmoil there? Can you imagine the exodus? I am surprised the drop wasn't much steeper.

How about Dell? The paper talks about the obvious weakness in sales. But, the FT informs: "The bigger concern is price competition prompted by the industry's rush toward cheap netbooks."

Yes, it is the bigger problem. However, the bigger problem is Dell's, for heaven's sake: wrong product, wrong execution, no vision. That's why everyone else is eating its lunch. Further, "Dell is suffering from weaker margins. In part this reflects higher component prices, particularly for flat-panel screens." Actually, the component prices are up across the board, not just screens, and the reason is demand. The rest of the world is demanding more product of what's needed, and that's driving up the prices of everything from chips -- think Intel (INTC - commentary - Trade Now) -- to Flash -- think SanDisk (SNDK - commentary - Trade Now) to glass screens -- think Corning (GLW - commentary - Trade Now). That's a sign of resilience if there ever were one.

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