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This morning Wall Street will wax enthusiastic about
, which is not only executing well but benefiting from good secular trends and growing market share.
Cisco will likely ignite technology in the early going, but just because the company is basking in the sunshine doesn't mean the personal computer, cell phone and consumer electronics sectors are on fire too.
I will not discuss Cisco because there is little I can add to the analysis. What I will note, however, is evidence that the outlook for another part of technology, the cell-phone industry, is deteriorating.
This was demonstrated, in part, by yesterday's third-quarter release from
( CELL), one of the largest distributors of wireless devices and accessories.
Last night Brightpoint cut its sequential growth estimate for fourth-quarter handsets in half -- the previously upward-revised forecast of 15% to 20% was reduced to 5% to 7%.
It is interesting to note that at the same time demand is moderating, Brightpoint's inventory build of finished handsets was up by over 100%, vs. the prior record rise of only 30%.
Slowing personal computer and cell-phone demand, coupled with a mix change to lower-end products that consume less semiconductor content, demonstrate that what is good for Cisco may not be good for the semiconductor industry. (CSR, the largest distributor of Bluetooth chips, confirmed this mix change to lower-end handsets that do not use Bluetooth by reducing guidance Wednesday as well.)
When I also take into account the softness in consumer electronics (e.g., slowing comps at
) and weakness in personal computers (e.g.,
lowered personal computer forecast recently), it speaks volumes about the early impact of slowing consumer spending, and an absence of exciting new products that would stimulate cell-phone or PC sales activity.
The cell phone and personal computer industries are highly penetrated and mature, and I don't see any meaningful product introductions or better functionalities that will spur replacement demand in either sector.
With most of the incremental growth coming from lower-priced units in emerging markets (and its lower semi content), it remains possible that an era of profitless prosperity looms for these two sectors of technology as average selling prices continue their rapid descent.
So a broad rush into technology following the enormous run from the spring lows might be a mistake.
At time of publication, Kass and/or his funds had no positions in stocks mentioned, although holdings can change at any time.
Doug Kass is general partner for two investment partnerships, Seabreeze Partners L.P. and Seabreeze Partners Short L.P. Until 1996, he was senior portfolio manager at Omega Advisors, a $4 billion investment partnership. Before that he was executive senior vice president and director of institutional equities of First Albany Corporation and JW Charles/CSG. He also was a General Partner of Glickenhaus & Co., and held various positions with Putnam Management and Kidder, Peabody. Kass received his bachelor's from Alfred University, and received a master's of business administration in finance from the University of Pennsylvania's Wharton School in 1972. He co-authored "Citibank: The Ralph Nader Report" with Nader and the Center for the Study of Responsive Law and currently serves as a guest host on CNBC's "Squawk Box." Kass appreciates your feedback;
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