SAN FRANCISCO -- Even as tech stocks managed to stiff the
cynics today, nervous eyes turned to tomorrow's midquarter update from
. Intel's news will play a big role in determining whether the message from
things aren't getting worse
yes, they are
) is telling the "real story" in techland.
fell 0.7% and the majority of stocks were losers in over-the-counter (as well as listed) trading. But it could have been worse. Hewlett's
negative news presented a ready-made excuse for some good old-fashioned profit-taking after yesterday's robust gains.
The Comp outperformed the
Dow Jones Industrial Average
, which shed 0.9%, and the
, which lost 1.1%. In addition to H-P, which skidded 4.5%, blue-chip averages were weakened by flagging energy stocks and
J.P. Morgan Chase
, which shed 3.4%. The financial services giant said its trading revenues and
venture capital investments have suffered.
Today's relatively resilient performance from tech brings us back to Intel, whose call occurs after the close tomorrow, meaning the edginess in techland is likely to mount as Thursday's session unfolds. (
warning late Wednesday isn't likely to help.)
Intel rose 0.3% today, but most on Wall Street believe the company will have to scramble to stay on track and make even the low end of its revenue guidance,
previously set at $6.2 billion to $6.8 billion. Furthermore, analysts at
Credit Suisse First Boston
cautioned that Intel may be able to maintain prior revenue guidance only by channel stuffing, as
Conversely, Hans Mosesmann at
believes the chip giant will "make the quarter," and Jonathan Joseph at
Salomon Smith Barney
reiterated his estimates for $6.35 billion in revenues for the quarter and earnings per share of 13 cents, which is 2 cents above the consensus.
"They might narrow the
revenue range but I expect no change in outlook," Joseph told The Taskmaster. (Joseph maintains a 1M or "buy" rating on Intel; Salomon Smith Barney has not done underwriting for the company.)
Jeff Van Harte of
in San Francisco, which manages about $3.5 billion, said the wide discrepancy of opinions about Intel is notable, given the company is so widely followed.
Still, the folks at TransAmerica are putting their faith in the chip giant.
"From the body language, I would expect them to meet guidance and say things have stopped getting worse," said Tim Gaumer, an analyst at the firm, who doesn't expect "anything out of the ordinary" when it comes to inventories. He noted inventories are at low levels throughout "the whole food chain."
A Xilinxian dose of "things aren't getting worse" from Intel would certainly please the bulls.
TransAmerica's optimism about Intel is part of a broader belief that the PC space will be the first area to benefit when stabilization returns to the tech area, beginning later this year or early 2001. PC "earnings are depressed now," Van Harte conceded, but "business is more stable and I'm more confident of recovery
there vs. optical, where earnings have cratered and some stocks are still overvalued."
The rollout of the Windows XP operating system, in conjunction with flat-screen panels, will help spark an upgrade cycle in business and unleash pent-up demand among retail consumers, he argued. "It will not be a Windows 95-type event, but
XP will be significant."
Van Harte, who manages the $200 million
TransAmerica Premier Equity fund, is seeking to "catch the recovery" in PCs via long positions in Intel,
Advanced Micro Devices
issued some mildly positive comments about the PC market after the close Wednesday.)
The fund was down 6.6% in 2001 through yesterday, after falling 13.8% in 2000, according to
Notably, while Van Harte foresees the light at the end of the tech tunnel, he's not overly exposed to the group. Currently, about 22% of the fund is in tech, he said, far less than at its peak last year.
Areas where the fund manager sees better prospects include financial services, where favorites include
Other recommendations (and longs) include
Robert Half International
The Anecdote, Please
That a growth manager like Van Harte isn't terribly enamored of tech got me thinking about
yesterday that institutions remain skeptical about the sector.
For whatever it's worth, Hugh Johnson, chief investment officer at
, which manages more than $600 million, also expressed views supportive of Kass' contention.
Johnson declared without hesitation today that "the bear market ended and a
new bull market began on March 22," and that tech stocks are "no longer particularly overvalued." The price/earnings-to-growth ratio of the 238 tech stocks in the
is currently around 1.0 vs. 1.87 at the peak in March 2000, he noted. "You get a couple more companies like Xilinx saying 'it doesn't suck as much' and you watch how
investors climb on because the valuations are not as extreme."
Nevertheless, First Albany remains underweight tech and telecom.
previously, Johnson's preference is to wait for trends to unfold, rather than seeking to predict them. Still, in the context of this sentiment debate, it's notable that he's optimistic today's outperformance by tech could soon be the norm.
"Tech has not yet hit the relative performance trip wires that tells me to move," he said. "I believe it will happen, but it hasn't happened yet."
The ball is in Intel's hands now.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.