Tech Sector Mess: Was It Supposed To Be This Bad?


You hear it? That strange hissing noise? Sssssssssssss. It's coming from the tech sector. What a mess. A lot of me says you knew this just had to happen, that some of the air had to come out of some of these shares.

But this much? For a moment, the NASDAQ was down over 100 points. Not the Dow. The NASDAQ! But the more people I talk to, the more this question comes up: is the action to the downside as unfairly magnified to the downside as some say it was to the upside?

It's a fair point. Especially when you look at the action right now in some of what some had recently called the "safe havens" in tech: Google down 5 per cent; Apple down even more; Research in Motion getting crushed; same goes for Microsoft and Intel.


And Intel's serious move to the downside comes even as the company prepares to release its next generation Penryn microprocessor on Monday. In other words, despite today's nauseating, stomach-churning move to the downside, innovation is still alive and well in tech.

Some of this, of course, is tied to comments from Cisco Systems CEO John Chambers, where he mentioned a "dramatic" slowdown in orders from the recently hard-hit financial companies, as well as some of the downtrodden car makers. I was on that conference call, and listened again to Chambers when he was on our air this morning: I didn't get the widespread depression some are attributing to him.

In fact, I got a completely different message. Cisco has plenty of business units that are doing exceptionally well. Softness in one doesn't mean softness overall. And Chambers pointed to unusually strong momentum in Germany where the company saw a surprising 30% surge in business.

And there are some bright spots, to use a pun, thanks to blockbuster earnings from First Solar. The company's shares are soaring, and many in the group are following the company north: JA Solar Holdings; Evergreen Solar; SolarFun Power Holdings. It's not all good though. Recent high-flyers like SunPower and Ascent Solar are indeed giving back some of their recent blockbuster gains.

Still, broad based sell-offs like these are usually the opportunity investors have been waiting for to snap up bargains. This is where discipline comes in. It's so easy to buy high and sell low. The opportunity comes when you can buy quality low, and then patiently wait for it to rise. Today, this week, might present that kind of opportunity.

The fundamentals for most of these companies have not changed today, yesterday, this week, or even this month. This is ugly. No question. If you haven't sold, think twice. If you have, think about some bottom-feeding and bargain-hunting to get back in.

At the very least, you gotta wonder whether the Fed steps in and cuts by another 50 basis points come December. That could mean a 'Happy Holiday' for Main Street, Wall Street, and so many key players in tech.

Questions? Comments?