Technology Needs A Vet, Not A Rate Cut

“Demand for semiconductors began to slow late in the fourth quarter of
2000,” said James C. Morgan, chairman and chief executive officer of
Applied Materials. “Inventory buildups in telecommunication products,
slower-than-expected PC sales and slower global economic growth are now causing
customers to reevaluate their capital spending plans. Since the beginning of
January, a number of our customers have been revising the timing of their
capital spending and rescheduling or canceling existing backlog, resulting in
the postponement in delivery of equipment. Therefore, we expect orders and
revenue to be below our original targets.”

Revenue is expected to be 7%-10% below the $2.9 – $2.95 billion revenue
target issued by the Company on its Nov. 15, 2000 earnings conference call.
First quarter revenue will include only those 300mm system shipments that have
been accepted by customers, and 300mm revenue is in line with original
estimates. Due to the expected revenue shortfall, earnings per share are not
expected to reach the target set by the company. Orders are expected to be below
a 1.0 book to bill ratio for the quarter. (Business Wire)

Applied Materials, Inc. has rallied from 34 to 54 in the past month. As
I write this, Adobe Systems
(
ADBE |
Quote |
Chart |
News |
PowerRating) just messied up the litter box and is trading
down 11, or roughly 20% lower, from the close of today’s trading. Is there
a Vet in the house??

Pretty much more of the same that we’ve been hearing for the past three weeks.
Is this, too, really “built in”? Can we really buy the argument
that all this weakness and the earnings stink-bombs will miraculously go away in
the second half of this year? Can we just ignore all this data and hope it
will just go away?

Can we believe a man like John Chambers, the CEO of Cisco Systems when he says
that although
(
CSCO |
Quote |
Chart |
News |
PowerRating) will miss its annual revenue growth target of 30%-50% this fiscal year, he is “absolutely, very confident” that they’ll meet
that target in the next three to five years. Wow, John, amazing.
When you spoke in Switzerland this weekend you said that things had deteriorated
further since you last spoke just two weeks ago and that the slowdown in CSCO’s
business continues to accelerate. So, he couldn’t see two weeks into the
future when he spoke in Arizona (two weeks before this past weekend’s speech in
Switzerland) but he is “absolutely, very confident” about the next
five years? *

If I hold your hand, would you read me a bedtime story, John?… John?

I’m not going to sit here and write about how “you have to own stocks
before a Fed rate cut” (like our big-name analyst friends are driving into
our craniums all day long) and how the Federal Reserve is going to cure all the
economic woes and hurdles we face. I won’t do it because I don’t believe
it. I will play 2001 as a cyclical bear market in the Nasdaq and look to
short the rallies when they give me the correct entries.

I want to go on record at this time, when everyone feels bulletproof and is
celebrating the “new bull market,” as saying the Nasdaq Composite will
make new lows some time in the next two quarters. Hey, if I’m wrong, I’ll
just “revise” my predictions like all the analysts do. I have
some great examples to follow, but we won’t mention any names. Some of
those guys are a lot bigger than me.

Ahead of the Fed meeting, we saw the Nasdaq Composite attempt a rally today that
failed to take out the resistance posed by last Thursday’s (Jan. 25) gap down
open. Until that area is exceeded, the chart is showing me a pullback is
in order. However, this can all change in seconds if the FOMC decision is
interpreted as wildly favorable to the market.

Oh, I almost forgot, the Dow Jones Industrial average was up almost 200 points
today as it appeared money was out seeking short-term safety.

Be careful tomorrow and consider taking profits on longs if you haven’t yet.

No picks tonight ahead of FOMC decision.

If the FOMC disappoints the market, short away. If they please the market,
it is anyone’s guess.

Have a good night.

Goran