Positive expectations from the chip sector including updated forecasts from companies such as RF Micro Devices and Texas Instruments helped buoy the tech sector during the first week of the unofficial autumn trading season in the US.
Shares of companies on the US markets have drifted upward during the third quarter, led by optimistic comments from tech vendors that are beginning to see an uptick in user demand. But many market observers noted that trading has been light during the U.S. summer holiday season, and thus it's hard to tell whether the confident mood will last once everyone gets back to work and waits nervously for third quarter sales results to roll in.
The chip sector, meanwhile, has helped elevate investors' mood this week. RF Micro Devices became one of the latest tech vendors to provide an upbeat outlook. The company, which makes high-performance semiconductor components, provided updated financial information for its fiscal 2010 second quarter, ending Oct. 3, during a webcast presentation at a Kaufman Brothers investor conference.
Demand for RFMD's products is tracking ahead of plan due to mobile handset demand, particularly for 3G smartphones, according to Bob Bruggeworth, president and CEO of RFMD.
RFMD now expects to exceed the high end of its previously stated forecast of free cash flow of approximately $100m (£60m) in the current fiscal year, he said. Company shares rose by $0.48 to close at $5.49 after Bruggeworth's remarks.
Smartphones also played into updated guidance from Texas Instruments (TI), which Wednesday raised its revenue and profit estimates for the third quarter.
Demand for chips used in notebook computers, consumer products and mobile phones - especially smartphones - has fueled third-quarter growth, said Ron Slaymaker, a vice president at TI, during a conference call.
TI raised its revenue forecast for the third quarter by about $150m (£90m) over its prior estimate in July, to a range of $2.73bn to $2.87bn (£1.7bn). TI also raised its earnings per share estimate. Company shares were trading at $25.22, up by $0.08, Thursday afternoon, but then slipped to close at $25.01.
Intel kicked off the latest round of good news from chip companies two weeks ago, when it updated its expectations for third-quarter revenue due to stronger-than-expected demand for processors and chipsets. Intel said it expects third-quarter revenue to be $9bn (£5.4bn), "plus or minus $200m," compared to its previous guidance of $8.5bn (£5bn), plus or minus $400m.
Meanwhile, smaller players in the sector also have issued upbeat predictions. Analog and mixed-signal power management chip maker Volterra Semiconductor Thursday said it now forecasts third-quarter revenue of $29m to $30m, up from a previous range of $25m to $28m. Company shares immediately jumped Thursday afternoon by $0.27 to trade at $19.61.
On Tuesday, programmable chipmaker Altera said it now expects third-quarter sales to be flat or up by 3 percent from the second quarter. Previously, it had been predicting sales to be down by as much as 5 percent. Also Tuesday, Microchip Technology said it now expects quarterly sales to be up the 12 percent to 14 percent sequentially, up from previous guidance of 7 percent to 11 percent.
News coming out of the sector has not been completely positive. Taiwan Semiconductor Manufacturing (TSMC) reported its first monthly revenue dip since the recession caused sales to bottom out in February. The company said consolidated monthly sales in August were down 4.3 percent compared to July and down 6.4 percent compared to August of last year.
Nevertheless, no one expected perfectly sunny news from the tech sector and the upbeat forecasts issued by tech vendors, especially chip makers, for third-quarter sales are fueling hope for the next round of financial reports, due next month.
The tech-heavy Nasdaq closed Thursday at 2084, up by 22 and well above the yearly low of 1268.64 on March 9, which was also its lowest close since October 2002 near the trough of the dot-com bust.