Even the bulwarks buckle
A handful of consumer-tech companies were seemingly braced for economic downturns this week.

  • Netflix (Nasdaq: NFLX) was supposed to thrive as cost-cutting moviegoers turned to the home-delivered DVD renter for a thrifty night indoors, yet the company talked down its year-end subscriber targets again on Monday.
  • Amazon.com (Nasdaq: AMZN) should own the holidays, especially with weary drivers choosing to go shopping online rather than pay up at the pump, but the company's guidance on Wednesday was grim. At the low end of its wide guidance range, Amazon is looking at a 46% decline in operating income on a mere 6% in top-line growth.
  • Apple (Nasdaq: AAPL) is rocking with its market-share-swiping ways, but even the Mac Daddy is nervous. At the low end of its guidance for the current quarter, revenue will fall for the period. What's more upsetting is that earnings will take a hit, even at the high end of the company's projected profitability.  

So what's an investor to do? "Sell banks, buy tech," I suggested earlier this week. That theory may have a few holes in it, given the weakness in the consumer-tech companies that I admire, but I'm sticking to it. Unlike financial companies, the value of whose assets remain a mystery in many cases, consumer-facing tech companies are offering up tangible products. Economic weakness will naturally get in the way of the ability of buyers to pay up for DVD rentals, holiday gift shopping, and a shiny new iPhone, but these are still mostly cash-rich companies that are faring far better than their competitors.

I'm not arguing that investors should cheer defeats that are relative victories. However, now is the time to make your list of the companies that will bounce back the strongest when the market does recover.

Briefly in the news
And now, let's take a quick look at some of the other stories that shaped our week.

  • If stateside letdowns are getting to you, maybe you should look elsewhere. Baidu.com (Nasdaq: BIDU) posted stellar third-quarter results on Wednesday, with revenue and earnings soaring 85% and 91%, respectively. The Olympic Games in Beijing may have helped, but the near-term outlook is just as scintillating. Baidu is looking for 80% to 85% in revenue growth during the current quarter.
  • AMR's (NYSE: AMR) American Airlines is suing Yahoo! (Nasdaq: YHOO). The struggling airline believes it's illegal for Yahoo! to place sponsored text ads on query results for trademarked terms such as America's AAdvantage loyalty program. Perhaps so, but charging me $15 for a single piece of checked baggage has to be a crime, too. And what's the deal with a $100 charge for antlers, hang gliders, or javelins? I may be overestimating the ambitions of my fellow fliers.

Until next week, I remain,

Rick Munarriz