Markets Continue Slide. Economic Worries Standout in Dow's 300 Point Loss

Slowing US Economics have pushed sellers to the forefront this entire week, and today's 300 point Dow tumble was another straw in the year to date tumbling market house. S&P stands down 9% year to date, while the Nasdaq is off 11%.

The Nasdaq was hit hard this week as technology sold off on those very same economic fears. The winners heading into the tail end of 2007 were those being bid up to ever higher 52-week and all-time highs and soon of these companies are feeling the financial fallout as their P/E ratios get slashed worst than Real Estate on Elm St.

It didn't help this week that Intel (INTC) missed numbers, by a couple cents, and came in on the low end of revenue guidance, even though business is just fine (Revenue guidance of up to $10Billion for next quarter versus the estimated $10.1Billion). The stock took a 12% hit that day, putting it under $20/share.

Apple's (AAPL) marquee event MacWorld, was deemed a failure this year as everything announced was expected and it included nothing as revolutionary as last year's iPhone. A Router/Storage hub, an iTunes movie rental service, new iPhone software and the new thin laptop that has been criticized by many as not hitting any particular market. Only time will tell whether the super thin Mac Book Air will sell decently well at its $1800 price point. Sony (SNE) has their ultra-thin laptop line well over the $2000 price point for years. Apple shares have fallen from their $202 record and now sit just over the $160 mark, with expected quarterly blow-out earnings numbers coming next week. A troubling fall for a company built on Steve Jobs hype, which now has analysts falling over themselves reiterating its cheapness/value opportunity.

These are troubling economic times nonetheless, as investors look for safer havens, seeing their financial, consumer and technology faithful stocks being sold off in great numbers.
The Googles (GOOG), Baidus (BIDU) and Amazons (AMZN) are all down significantly as the high P/E ratio game of Internet companies is shrinking due to recessionary economic factors and fears. The banks are steeped in mortgage losses and more potential dividend cuts are luring Investors away. Even hot commodities of late like Oil and Gold have cooled quickly and abruptly by the sell triggers.

All eyes now shift to the Federal Reserve and Chairman Ben Bernanke. Traders expect at least a .5% Interest Rate cut at the next meeting, and Bernanke has pledged the Fed will be aggressive in trying to fend off recession. We'll see at the end of the month how it all plays out, but till then expect the same volatility and uneasiness when choosing the right things to buy, or in fact short sell.

Disclosure: Author owns AAPL, GOOG

Major Tech Earnings Start Q3 with a Bang Part 1: Intel Beat Estimates, Ups Guidance

The major player in its business segment, Intel (INTC) was looked upon to set a direction for Technology early in this earnings season. And set a direction it did as the companies beat expectations and had its shares move higher in after hours trading. Intel came down the pipeline first, and the computer chip maker left nothing to chance this quarter as sales continued to be strong and CEO Paul Otellini projected further strength ahead.

All things that a market cheers! Intel was able to put a number together this quarter that led it do double digit sales growth for the first time in years. First the numbers.
Income was up to $1.8Billion or $0.31/share vs. a year ago $1.3Billion or $0.22/share (an increase of 40%)
Revenue was up to $10.1Billion, which represented an increase of 15% year-over year.

That all important margin issue, that had plagued Intel for much of the past 12-16 months seems to be forgotten as the company has stepped completely ahead of Advanced Micro Devices (AMD) and into its formerly held dominant market position. Due to heavy price wars with AMD, Intel's margins were dropping quarter after quarter, and with that the stock price went stagnant. However in the past 2 quarters this story changed and Intel proved once again that it has market power when it comes to selling processors. Gross margins at the company rose slightly again and the expectation for the 4th quarter is that Intel will be able to nudge them even higher still above 55%.

Analyst estimates had called for more conservative margin numbers leading to $0.30/share and $9.6Billion. Intel handily beat those figures as demand for the company's products were heavy due to increasing laptop use. The very successful Core 2 Duo line proved a winner again as Computer makers like Hewlett Packard (HPQ) and Apple (AAPL) are stuffing the chips in their systems left and right. A quick look over at Amazon's best selling computers list has 4 Apple machines in the top 5 all sporting Intel's Core 2 Duo chip sets. Hewlett Packard holds 6 of the next 10 spots with 4 Intel powered systems and 2 AMD powered systems.

In all, of the top 15 true laptops on Amazon's list, 12 run on Intel chip sets. Now that's dominance in a sector that is growing much faster than traditional computer desktop systems. The company guided even higher than previously for the 4th quarter, now expecting sales between $10.5Billion and $11Billion; analysts were expecting $10.4Billion.

With the way the computer industry is growing, especially in the laptop sector and emerging markets, it's the hardware that will continue to sell and sell well. While all the fuss has been on piracy when it comes to Software, the makers of the nuts and bolts, so to speak, will continue to be strong. While in the Far East piracy runs rampant as the computer market continues to expand the difficulty involved in illegally copying chip design and computer design innovations is paramount to the tasks involved in copying software. Bottom line is, Intel dominates its marketplace, it is the brains behind the most popular systems being sold today and we are coming to an era of innovation in Computers where customers are becoming excited again about what their systems look like and what they can do. This shines a particularly bright light for the rest of the year and beyond for that company, that more times than not, is truly Inside.

Disclosure: Author is long AAPL, INTC

Is the Hype behind the VMware IPO Worth the Investment?

VMware (VMW) is a software service unit that creates various virtualization solutions for a multitude of consumers. EMC Corporation (EMC) is behind VMware and is spinning about 10% of the company in the IPO that is due to open trading August 14th. EMC acquired VMware in 2004 for around $600Million and if the hype machine behind the IPO translates into interested investors, the company will surely reap the benefits. The biggest sell of virtualization software is the ability to run multiple operating systems on the same physical machine at the same time. With the amount of money that is spent on server infrastructure within American corporations this, some argue, is the future of computing. Less physical boxes running simultaneous split operating systems will save incredible amounts of money, use less resources and provide increased flexibility as the world of multi-core computing becomes reality.

VMware also creates smaller scale solutions for consumers, such as its popular desktop virtualization tools that allow Apple (AAPL) Mac users the ability to simultaneously run Windows on their Intel-based iMacs or MacBooks. Apple's own solution called Boot Camp provides a similar functionality however the user is forced to reboot the machine in order to switch between Windows and Mac OS X.

This growing business isn't anything close to small peanuts as VMware did $700Million in Revenue last year and had $87Million in profit. Last quarter the growth continued as VMware reported $300 Million in revenue, representing an 89% increase year-over-year. EMC plans to issue 33 Million shares of the around 375 Million in VMware. That's right EMC is keeping almost 90% of the company out of public hands. VMware has certainly been popular among the huge market tech names as both Cisco (CSCO) and Intel (INTC) have stepped up and purchased small pieces of the firm.

Can VMware make the average investor money on IPO day? It's possible but I would be extremely cautious of over-paying for a tiny piece of this solid, growth company. Investors started to realize that EMC would actually be the safer way to get in on the VMware craze and shares of EMC jumped 8% today to $19/share, giving the company a market cap of $40Billion and a P/E ratio of 31. A company that showed growth of 20% last quarter and posts an estimated growth rate of 19% from this year to next is certainly attractive at P/E levels in the low 30s.

The hype behind VMware is icing on the cake for EMC investors, and this should be the safer, smarter play for those who won't get in on the ground floor when VMware's IPO price is announced. Ranges for the IPO have increased from the mid 20s to the high 20s with some analysts expecting over $30/share. There's also been talk that the company could open as high as $60/share. At $60 that would give VMware an implied market cap of $22Billion. Half the market cap of its owner EMC. That would be extremely high for a company that looks at estimates of $1-2Billion in revenue this year. In contrast, EMC had over $11Billion in revenues last year and sports of growth rate of almost 20%.

Virtually the entire market expects a red hot VMware IPO, no pun intended. Plenty of money will change hands and opportunities will be there, however, a word of caution for investors because if reasonable prices can't be found in the early going I would not recommend the chase. With EMC still owning 90% of VMware anyway, that should be the way to play this one.

Disclosure: Author is long AAPL, INTC and holds no positions in the other stocks mentioned