The NASDAQ began its trading week with an upbeat note from Xilinx [NASDAQ:XLNX], the No.1 programmable logic chip maker, who told investors that the company would keep its financial targets unchanged for its fiscal first quarter. The company also said that it sees a considerable slowdown in product cancellations and delays. 

Investor enthusiasm on tech stocks was, however, hampered by the gloomy news from Hewlett-Packard Company [NYSE:HWP] when HP executives told analysts at its semi-annual business update in Palo Alto, Calif. on Wednesday, that the company is seeing the slowdown in IT spending spreading beyond the United States and Europe. HP executives also said that the company is now more cautious regarding its revenue guidance for the third quarter ending July 31.

For the chip and PC hardware sectors, encouraging news came later in the week from chip giant Intel, who told investors at its first mid-quarter conference call that Intel would not revise the revenue and gross margin guidance previously given last April. "The second quarter is shaping up as we expected," said Intel CFO Andy Bryant.

Prior to Intel's mid-quarter financial update, several Wall Street analysts were very skeptical and predicted that Intel would lower its revenue guidance. Mr. Jonathan Joseph at Salomon Smith Barney, was the only Wall Street analyst who correctly predicted that Intel's mid-quarter financial update on June 8 would be a "non-event". He has currently set a 12-month price target for Intel shares at $40.

Despite positive news from tech- bellwether Intel, tech stocks were sold off on Friday as Juniper Networks announced that its revenue for the second quarter would be one-third less than the original guidance of $300-$330 million.  After a rather rough week ending June 8, the NASDAQ still managed to close up 65.66 points or 3.05 percent from the previous week's closing of 2149.44.

Based upon our market sentiment charts showing a continuous strong up-trend for both the NASDAQ market and Intel, we forecast that the NASDAQ will continue to move up higher near-term with a target of 3000 by September 2001. We believe that Intel's share price could break the resistance level of $33 near-term. Intel's share price may break the second resistance level of $38 by September 2001 if the company can deliver any encouraging news at its next mid-quarter financial update.

From our viewpoint, information provided by companies at this week's mid-quarter financial updates was rather contradictory to each other. For starters, Intel told investors that it would not revise the revenue and gross margin guidance previously given last April and that the second quarter is shaping up as they expected, while HP executives said its business downtrend continues and the company has no "crystal ball" to predict its bottom. 

Xilinx, the No.1 maker of programmable logic chips used in networking equipment, said that it sees a considerable slowdown in product cancellations and delays, while Juniper Networks, the networking equipment maker specializing in core routers, revised its outlook for its second quarter results and announced job cut-backs.

Our analytical approach is to find the commonality among the information provided by these companies. First, we looked at Intel's statement saying that its second quarter is shaping up as they expected. This statement is substantiated by comments given by Mr. Hector Ruiz, Chief Operating Officer of Advanced Micro Devices [NYSE:AMD], the No.2 microprocessor chip maker, who also said that the sluggish global personal computer market would return to normal in the fourth quarter of this year. 

Second, Ms. Laura Conigliaro, analyst at Goldman Sachs, said this week that her recent checks with a large U.S. distributor suggested that the U.S. (server) business was stabilizing with a slight positive uptick. Third, EMC told investors in its recent EMC [NYSE:EMC] open communication statement, that the company would stick with its previously discussed 2001 revenue growth target of 20% or greater. All of the above statements point to an uptick in the IT and PC business in the second half of this year, rather than a continuous slowdown.

According to CBS Marketwatch, Morgan Stanley's networking analyst Christopher Stix believes that Cisco Systems [NASDAQ:CSCO] is on a mission to offer customers discounts to undercut Juniper. Taking into account Xilinx's executives comment saying that the company sees a considerable slowdown in product cancellations and delays, we believe that Juniper's problem may be in part due to pricing pressure from competitors including Cisco Systems.

From our commonality analysis, we conclude that the slowdown in IT spending, as well as in the PC business seen at HP and Juniper Networks, may be due in part to intensifying competition, rather than being an industrial-wide issue. This is particularly true for HP where the competition in all sectors including ink-jet printers, PCs, UNIX servers and data storage, is fierce in an already slow business environment.