Say hello to your friend the weathervane. This humble bronze rooster or windsock can tell you which way the wind is blowing, and sometimes even how hard. The stock market has weathervanes, too -- like Photronics (NASDAQ:PLAB), for example. This company makes photomasks that let semiconductor makers like Freescale (NYSE:FSL), National Semiconductor (NYSE:NSM), and United Microelectronics (NYSE:UMC) do their work, as well as providing photomasks to flat-panel display designers such as LG Philips LCD (NYSE:LGL) and Samsung.

When sales are slow for Photronics, it means that the big boys that make semiconductors and flat panels don't need to keep their supply lines quite as loaded -- and the pain travels up the supply chain. This quarter, Photronics pinned its 5.9% drop in sales (to $108.2 million) on lower demand for its LCD photomasks.

The quarter was a dog in many ways, as slower sales led to shrinking margins across the board and weak net income of just $4.6 million, less than one-third of the year-ago result. The company also saw $1.8 million of restructuring charges as it followed through on the revamping of its manufacturing capacity, a move announced at the end of the previous quarter. It's never fun to reduce your workforce by 6%, but the plant in Austin, Texas, was apparently not pulling its weight and had to be closed.

On the other hand, a joint venture with computer memory specialist Micron (NYSE:MU) could pay dividends down the road. I'm always happy to see companies sacrifice short-term performance for long-term gains, and Photronics appears committed to staying on the leading edge of photomask technology.

Management says it expects the tough LCD market to improve in a few months, and believes there are already indications of such progress. And the competition is allegedly doing even worse; CEO Michael Luttati said that Photronics is actually gaining market share in the flat-panel space at the moment.

The shares are trading near yearly lows, although investors seemed to take heart from the optimistic comments in the earnings release, and the stock jumped by more than 4% yesterday. Are the good times about to start rolling? Check your weathervane.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he could use a nice weather vane. You can check out Anders' holdings if you like. Foolish disclosure is always swinging in the wind.