In case you were feeling less than brilliant because you don't have a clue what the market was really saying this week -- don't. No one else does, either.

Consider the put/call ratio as monitored by the Chicago Board of Trade. The 21-day moving average climbed for a while, but has now stalled out around 0.67. Since a higher number reflects negative sentiment, you could take the flattening as a positive sign. On the other hand, it also means the market has yet to reach a bottom, says Joe Sunderman, director of trading at Schaeffer's Investment Research.

In May, by contrast, the index reached 0.70, and the tech-heavy Nasdaq took off, he said.

So, how to weigh this development? "The big problem with trying to game negative sentiment is that it is extremely difficult to judge when it is so great that the market has to turn," wrote contributor James "Rev Shark" De Porre in a missive Friday morning.

One of the major trends bugging market pros is the extreme volatility we've experienced. In fact, volatility in the tech sector increased 11.9% this week as evidenced by the CBOE Nasdaq Volatility Index (VXN) while volatility in the broader market decreased by 1%, says Stacey Briere, chief options strategist at Susquehanna Financial Group.

It's likely that some of the wild swings can be attributed to heavy hedge fund activity and subsequent activity by short players.

But more important than the spasms of the always nimble hedge-fund traders, is an underlying lack of conviction. "This is the most fickle market I've seen in years. One day the focus of options activity is on consumer stocks, then back to energy and back again to retail," says Briere.

Options activity in technology, however, is lighter than it has been at any point this year, with the notable exception of Motorola ( MOT) and Nokia ( NOK), the beneficiaries of ongoing strength in handhelds, says Briere.

Tech investors looking at third-quarter results and fourth-quarter guidance can draw any number of contradictory conclusions. SAP ( SAP) had a great quarter and raised full year-guidance, while Microsoft ( MSFT) had a generally in-line quarter but issued somewhat disappointing revenue guidance.

The Microsoft results are all the more disappointing because the good news that PC shipments in the quarter were up a better-than-expected 17% was outweighed by the bad news that the strong hardware sales didn't translate into more upside, noted Goldman Sachs analyst Rick Sherlund.

Intel ( INTC) had a generally strong quarter, as it announced the previous week, but the market still found something to worry over: higher gross margins. Normally that would be good news, but some investors figure margins are nearing a historic high and therefore have no place to go but down.

Other important technology companies whose guidance has disappointed Wall Street include Computer Associates ( CA), Amazon ( AMZN), Texas Instruments ( TXN) and KLA-Tencor ( KLAC).

Finally, in another example of analysis with a reverse twist, some traders worry that the spring rally lasted too long. "The fourth-quarter rally has been dampened. There should have been a correction after the second-quarter to set us up," said one buy-side analyst who spoke privately.

Novell's Day of Reckoning

A big shoe is about to drop on the heads of Novell ( NOVL) employees. The betting on Wall Street is that a long-rumored, and likely massive, firing will be announced as soon as Tuesday -- the first day of the business-software maker's new fiscal year.

CEO Jack Messman has been attempting to fend off scathing criticism of his leadership and the company's direction by institutional investors, the most notable being San Francisco-based Blum Capital Partners.

Richard Blum, the husband of U.S. Sen. Dianne Feinstein, and his partners say they're "discouraged by Novell's recent progress" and "are deeply concerned about the direction and pace you and the board are currently taking. Our conviction is firm in the future promise of the company. The question is whether the current management and board will execute," they wrote in a letter to Messman made public as part of an SEC filing.

Investors have demanded that the company make a substantial cut in operating costs from its total annual expense base of roughly $1 billion, which includes two corporate jets.

Novell's management acknowledges that it must reduce expenses, but isn't willing to confirm or deny rumors of a layoff. "As we indicated on our Q3 call, we will be making some cost-cutting moves. When we are prepared to make public what those are, we will," said spokesman Bruce Lowry.

To be fair, Messman has a very difficult task. Novell was long-known as the supplier of a popular network operating system called NetWare, whose relevance and popularity have faded. Last year, it purchased SuSe, a small software company that developed a flavor of Linux, the popular free operating system.

How do you sell something that's free? Like larger rival Red Hat ( RHAT), Novell sells service and support for its version of Linux, plus related items.

Although that sounds straightforward, it isn't; the business model is very complex. And Messman's job is all the more difficult because he is also running the company's still-profitable NetWare business. Even so, Red Hat's shareholders have reason to be a lot happier. Year to date, they've seen their investment appreciate by 61%, while shares of Novell have appreciated by just 9%, even after a mini-rally that began in August.

Along with the cuts in spending, Blum has asked that Novell sell a number of noncore businesses, move faster to partner with other companies, produce a broader Linux "stack," and boost shareholder value by buying back $500 million worth of shares.

Messman rejected the buyback at first, but recently agreed to buy back up to $200 million worth of shares. He also agrees that one business unit, Celerant, should be sold. Blum says selling off Celerant would net about $175 million, while the other units -- which Messman says he won't sell -- would bring in an additional $325 million.

The concessions are probably not enough to satisfy Novell's angry shareholders. Interviews with investors who have significant stakes in the company, or who have recently sold off their stakes, reveal ongoing dissatisfaction. "That's an old trick. Give someone a dime when you've asked for a dollar," said one. "That's not going to work,"

Perhaps not. But for now it looks like Messman has the support of his board, although one or two members are not completely in his camp, investors said.

A big layoff will be painful, but given Messman's reluctance to make other cuts, it may be inevitable.

TechWeek Scorecard
Index Closing Change
Nasdaq Composite 2090 0.4%
Philadelphia Semiconductor 425 -3.8%
Goldman Sachs Software 167 1.8%
TSC Internet 203 1.0%

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