Why Semiconductor Manufacturing International, Blucora, and Cray Tumbled Today

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Mixed results on Wall Street Tuesday signaled the uncertain among stock market investors right now, as people try to figure out whether the latest rebound from January's modest correction will last or give way to another decline. At least for a few stocks, though, the mood was more dour, as Semiconductor Manufacturing International (NYSE: SMI  ) , Blucora (NASDAQ: BCOR  ) , and Cray (NASDAQ: CRAY  ) all dropped substantially today despite the relatively flat market.

Semiconductor Manufacturing fell 19% after the Chinese foundry business reported a revenue increase in its fourth quarter of just 1.2% from the year-ago quarter, as earnings fell precipitously. Falling gross margins pointed to the struggles in the semiconductor market recently, and SMI's first-quarter guidance was even less appealing, with expectations for a 5% to 9% drop in sequential revenue and the potential for further margin erosion. With Intel (NASDAQ: INTC  ) potentially waiting in the wings to utilize its manufacturing capability more profitably, Semiconductor Manufacturing and its foundry peers could soon see an elephant enter the space and make competition a lot tougher.

Blucora fell 8% after the company was the subject of a scathing attack from analysts at Gotham City Research, which made negative comments about the sustainability of its Dogpile and WebCrawler Internet search engines. The report appears to center on the idea that Google should end its relationship with Blucora, and that its TaxACT tax-preparation service provides only minimal protection against a share-price decline. Given the impact of past attacks from Gotham City on other companies, many investors appeared not to want to wait out what could become an extended short attack.

Cray dropped 14%, but it's important to put the move in context as Cray stock soared 39% last Friday. Today's drop erased about half of those gains, but investors remain optimistic about the supercomputer company's past performance and future prospects after its fourth-quarter earnings release. Perhaps the most telling remark was the company's statement that "a wide range of results remains possible," leaving plenty of room for outperformance as well as disappointment.

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