This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TechWeek: '06 Could See Atypical Start

Now that the end-of-year rally looks pretty much like a done deal, is it time to starting worrying about the usual first-quarter slowdown in technology? Not really.

Demand for PCs and mobile handsets has been strong all year, and that pushed overall sales of semiconductors well beyond expected levels. The resulting low inventories in hard drives and semiconductors, as well as stronger-than-expected sales of enterprise storage products, along with other positive indicators, are convincing some analysts and investors that 2006 will get off to a strong start.

"At the beginning of 2005 we were concerned that high inventories would undermine pricing," says Shane Rau, who follows the chip market for IDC. At the time, Rau and his colleagues forecast that overall chip-industry revenue would decrease by about 1% over 2004. But strong sales likely will have swung the estimated loss of revenue to a year-over-year gain of 5% by the end of the month, he said.

Sales, of course, are just one part of the semiconductor equation. If the industry fails to manage its capacity correctly, it can create gluts that decimate margins, or shortages of product that can eat into market share, as Intel (INTC - Get Report) demonstrated this year .

"Chipmakers have been more disciplined about adding capacity than they have been in some time," says Graham Tanaka, principal of Tanaka Capital. Those companies have the healthy cash reserves to expand their factories, but have used their strength in a controlled fashion, he says.

Giving the industry more flexibility is the decreasing time it takes to order, produce and deliver semiconductor-manufacturing equipment. Cycle time has decreased from 18 months or two years to less than a year, says Tanaka, who notes that some chipmakers in Taiwan are running their factories at close to 100% of capacity.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DELL $0.00 0.00%
CSCO $26.00 0.00%
EMC $24.96 0.00%
IBM $147.98 0.00%
INTC $28.42 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs