When Lower Guidance Is Good (BRCM, TXN, NSM)

Broadcom Corporation (NASDAQ: BRCM) followed the path of other chip stocks and came out with lower guidance last night.  This was on the heels of atrocious guidance from Texas Instruments (NYSE: TXN) and National Semiconductor (NYSE: NSM).  Both companies also supply chips for mobile markets and for the communications sector.  What is interesting is that this is actually being deemed good news.

Broadcom said that order cancellations and a weak environment will putits quarterly sales between $1.05 billion and $1.10 billion in thefourth-quarter, down from a prior range of $1.17 billion to $1.24 billion.Thomson Reuters had estimates at $1.19 billion.  That would generallybe bad news, but everyone has been taking estimates down considerably.It is not as if warnings are new in this sector.

Broadcom (NASDAQ: BRCM) shares are up over 8% at $8.67, NationalSemiconductor (NYSE: NSM) shares are up 14% at $11.82, and TexasInstruments shares are up 4% at $15.45 after 45 minutes of trading.

What is interesting is how much “less bad” Broadcom’s target was thanboth TI and than National Semi. Texas Instruments gave horrible guidance and National Semi gave horrible guidance.  This “less bad” news is what tradersare focusing on.  Broadcom should be up in its own right as thisguidance was not as severe.  But the strength in NSM and TXN is onemore bit of evidence that bargain hunters are back and willing to buy if they feel there is upside to the stocks in 2009.

Bottom fishers are using the current weakness in a stabilizing marketto snap up shares for what may lie ahead rather than what is going ontoday.

We are trying to no longer be surprised by any reactions in this marketwhere a major bear market that refused to show any mercy suddenly has 9of 11 days with upside.  And the market itself is now negative on theday.

Jon C. Ogg
December 9, 2008