It's hard to call a market bottom. That is, it's hard if you want to be right -- anybody can spout off a bouncy forecast at any time, as long as nobody expects an accurate prophecy. But these days, we have so many business leaders waxing optimistic that even a curmudgeon like myself is getting downright inspired.
Careful recuperation
Here's a sample of the most prominent recent prognoses. First, the slow-and-steady personalities:
- Independent market researcher IDC reports that the overall market for personal computers may be stabilizing. "The market's decline is slowing," a recent update says, based on almost-normal sequential order drops between the raucous holiday quarter and the traditionally sleepy spring.
- Intel (NASDAQ:INTC) would agree with that assessment. CEO Paul Otellini believes that demand for Intel's system processors bottomed out in the first quarter, and recent order volumes are stronger than he had expected.
- Across the tracks at Advanced Micro Devices (NYSE:AMD), CEO Dirk Meyer is "hopeful things will stabilize and we'll see a resumption of growth in the back half of the year." That's all it would take to return AMD to actual profits and positive cash flows, if you exclude the more negative results of the new chip manufacturing foundry.
- And Cisco Systems (NASDAQ:CSCO) CEO John Chambers is "seeing some stabilization" in its order patterns that could lead to an upturn in coming quarters.
Swifter lifts
And then there's an even happier cadre of market weathermen -- the people who set the stage for the better-known players:
- Taiwan Semiconductor Manufacturing (NYSE:TSM), which makes a lot of the chips designed by AMD, Texas Instruments (NYSE:TXN), and other semiconductor designers, says that April sales skyrocketed 60% over March levels. It's tempting to interpret that fact as a sudden return toward business as usual. Just remember that April sales were still 23% below 2008 levels, even with that sharp sequential improvement.
- Glass panel maker Corning (NYSE:GLW) started out thinking that 2009 would see flat year-over-year demand for its LCD panel products. Now, after watching the demand for LCD screens actually improving throughout the last quarter, Corning believes in about 18% unit growth and solid profits this year.
What to make of all this data
You'll notice that I'm looking at high-tech businesses here, from the bottom rung of the food chain, Taiwan Semiconductor (TSMC) and Corning, to companies that sell products to retail and business customers (Cisco and the PC makers that IDC is talking about). That's because this sector has been beaten down harder than most in this lengthy downturn -- and these stocks could soar higher than most if and when they really bounce off the bottom.
And it's getting harder and harder to find the opposite of these rosy prognoses. A few months ago, everyone was very careful to point out that things would get worse before they got better again. Now, the consensus seems to be that the worst is behind us when it comes to shrinkage and growth in the high-tech sector. Sure, while it's only natural for CEOs to forecast some sort of rose-tinted view as poor quarterly performances begin to pile up, we now have consistent data across the technology sector that validates an improving viewpoint.
Follow that food chain!
What's even better, you see more glowing predictions from the basic building blocks of the gadget puzzle. Corning and TSMC work near the very start of the process that ends up putting a cell phone in your pocket or flat-screen TV in your living room. Dell (NASDAQ:DELL) and Cisco sell directly to corporate customers, and to retail consumers.
Because of this lengthy food chain -- from retailer to system builder to component designer to pure manufacturing infrastructure -- I expect the Cornings of the world to act as weather vanes far in advance of the changes at Dell's level. Everyone needs to plan ahead, so the basic building blocks should show us where the industry is going next.
So in summary, the Intel's and Cisco's around us are setting expectations for flat or slightly improved results in the near future. Behind the scenes, someone is ordering a lot more LCD panels and various kinds of semiconductor chips. The difference between the deliberate statements from forward-facing businesses and more cheerful back-end providers seems to indicate a real market bottom, or at least stabilization at current levels.
However, remember that while results from the first quarter may have been gag-inducing for many of these firms, they were an average of the first three months. If what initial suppliers like TSMC and Corning are telling us is true, sales in the first quarter picked up as it progressed; implying the second quarter of the year is beginning on a higher note than the first quarter results would indicate. A stabilization or market rebound might begin at a higher point than anticipated.
These guys have fallen far and hard, and everyone from Intel to Cisco seems poised for a bouncy rebound indeed -- sooner than they tell you to expect it.
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