SAN FRANCISCO -- The relief and applause surrounding Marvell Tech ( MRVL) on Friday is keeping alive the idea that the low set by semiconductor stocks in late November is going to hold. That's no small praise, considering investors in many other sectors have no such confidence. Marvell shares were up 53 cents, or 7.1%, to $8.05 in recent trading, mainly on the strength of its forecast for the first quarter, which was above Wall Street estimates, and on word that the chipmaker was going to slash 15% of its workforce in response to the deteriorating economic condition. Marvell's fourth-quarter revenue plunged 35% from a year earlier, a wild swing from third-quarter revenue growth of 4%, and an all-too-common pattern seen from chipmakers' earnings reports so far this year. But amid the showcases of extreme plummets in demand seen over the past few weeks of earnings reports, a funny thing has happened with chip stocks: they've stopped going down. On Friday, the Semiconductor HOLDRs ( SMH) exchange-traded fund was off 1.3% to $16.20, at approximately the same level it traded a week ago, two months ago and three months ago. That has put chip stocks in the unusual role of market outperformer. If you bought the SMH three months ago, you would sell today with a profit. Meanwhile, the Nasdaq is down about 12% during that time, while the S&P 500 is off more than 20%.
The secret to chip-stock success may merely be that the sector's downfall started before everything else. While we were all certain that the S&P would soon be jumping above 1,600 in the fall of 2007, semiconductor stocks had peaked that July and were on their way to losing, as a whole, more than 60% of their value by November 2008.