As technology rallies go, the rally of the last week and month is suggestive but not yet totally convincing.

For the week ended on September 16, a number of stocks in the sector such as Nvidia (NVDA), Intel (INTC), Oracle (ORCL) and Marvell Technology Group (MRVL) convincingly beat the 5.42% gain for the Standard & Poor’s 500 Stock Index. Nvidia was up 11.38%, Intel up 11.52%, Oracle 12.42%, and Marvell 10.81%, according to Morningstar.com.

That’s not especially surprising. High beta stocks, like most technology stocks, should rise faster than the general market when the broad market is climbing. Nvidia, for example, has a beta of 1.61, meaning that it is 1.61 times as volatile as the broad market. (By definition the broad market of stocks has a beta of 1.) Add in the way that technology stocks have been pounded in 2011–even after this rally Marvell Technology is down 18.22% for 2011 and Oracle is down 6.07%–and you’ve got a recipe for a tasty bounce.

But the technology rally is suggestive since it’s a reminder of the coming seasonal sweet spot for technology shares. Technology companies see a huge positive swing in revenue every year in the third and fourth quarters. I suspect we’re going to get some kind of November/December rally in stocks this year once the global economy (and especially the EuroZone)  has managed to survive September and October’s very rough spot without falling apart. The historical seasonal pattern for technology shares—added to the underperformance of technology stocks in 2011—will push the sector to the front in any rally. The sector’s performance could actually be quite explosive since the sector is under owned—for many investors technology shares have fallen off the radar screen—and any rally strong enough to generate “believers” will have a very strong bank wagon effect.

In most years sometime around October 20 or so is a good time for checking the technology weighting in your portfolio. This year last week’s rally says that you ought to start that checkup—and start adding to your technology weighting–a little early.

A technology rally would lift all boats but not equally. Microsoft (MSFT) was up only 5.36% last week, actually trailing the S&P 500 and Cisco Systems (CSCO) was up just 5.06%. On the other hand, Broadcom (BRCM) rose 6.67% and EMC (EMC) 6.9%, both more than the S&P 500.

I think this week’s rally in technology shares—even if it doesn’t hold long enough to roll right into an end-of-the year rally–provides a pretty good template for where to put your money this year. (Just to be completely clear, I’m not saying that the U.S. stock market is about to launch another big nine month rally or that any end of the year rally in U.S. stocks is sustainable. I think we’re all too aware of the big problems that are still lurking out there. All I’m looking for is a relief rally if, as I continue to think likely, European governments get their act together enough to kick the Greek and Italian debt crisis down the road into 2012 or 2013. In other words, don’t fall in love with anything you might buy now and look to take profits when the news flow of not-quite-so-bad-as-expected news starts to diminish in January or so.

Okay what did last week’s technology rally tell us about where to place our technology bets for the last quarter of 2011? Read more

Apple (AAPL) is set to report fiscal third quarter earnings after the close on Tuesday, July 19.

And I think I can write day’s headlines now: “Apple Beats Q3 estimates, Guides Q4 below Consensus.”

If I’m right, should you sell now and head for the hills? Not a chance. Any dip now would be the kind of buying opportunity that frequently comes with Apple’s quarterly earnings report. The stock has a history of volatility around its quarterly reporting dates. For example, Apple shares hit $345.68 on January 13. The company reported earnings on January 18. And by January 21, the stock was at $326.72. Of course, by February 16 it had rallied to $367.13.

I think this week will bring classic post-earnings volatility to Apple shares—and then some. The signs are pointing to one of those moments when analysts work hard to turn short-term negative noise into long-term negative forecasts.

Should we let the analysts scare us?  No.

To say that the 35-plus analysts covering Apple have a horrific track record of predicting earnings would be like saying Apple’s earnings results over the past five years have been okay.  Read more

Verizon gets the iPhone tomorrow (probably), but who gets the profits?

Verizon (VZ) and Apple (AAPL) will hold a press conference tomorrow to announce, everybody on Earth and the inner planets believes, that Verizon will start selling the iPhone in February 2011.

The big question, though, is price. Will Verizon subsidize iPhone sales to the same degree that AT&T (T) does now? If so Verizon is looking at big sales in 2011 but a substantial ding to earnings. If not, Apple will either see its huge margins on the iPhone, estimated by some Wall Street analysts at 60%, reduced or Verizon will wind up selling the iPhone at a price that makes it much less competitive with phones based on Google’s (GOOG) Android operating system.

The answer to that question depends on which company, Apple or Verizon, turns out to have been most anxious.

Apple badly needs another selling outlet besides AT&T. That company’s network has been slowed by the huge amount of bandwidth iPhone users consume to the point that the slow speed of service has cut into iPhone sales. (And in some cities, the AT&T network has been inadequate, users like my New-York-City-based partner Bob say, from the beginning.) Add in price cuts from Android-based phone makers and Android-based phones that have closed the “coolness” gap with the iPhone, and it’s really not surprising that Android-based phones grabbed 26% of the smart phone market in November, according to ComScore MobiLens, to the iPhone’s 25%. (Android’s share is coming largely at the expense of Research in Motion’s Blackberry, which saw its share drop to 33.5% in November from 37.6% in October.)

But Verizon needs the iPhone perhaps even more than Apple needs Verizon. Every month that AT&T is the sole outlet for the iPhone means another month where Verizon adds fewer customers than its big rival. In the third quarter, according to All Things Digital, Verizon had fewer than 3 million smart phone activations while iPhone activations exceeded 5 million. Verizon is spending billions to upgrade its network and the company can’t afford to fall behind AT&T in market share.

I think Verizon was the more anxious of the two companies. Read more

Apple–buy on the blip?

Well, actually on two blips.

The first is the blip—cost to investors about $6.3 billion on a $6.93 a share drop in Apple (AAPL) shares on July 13—created by research from Consumer Reports that argues that the iPhone4 dropped call issues are the result of a hardware problem.

The second—less visible in light of the furor caused by the Consumer Reports story—is a loss in market share for the iPhone in the three months that ended in May 2010. Research in Motion’s (RIMM) Blackberry was the leading smartphone in the period with a 41.7% share according to comScore. Apple’s market share fell to 24.4%, down from 25.4% in February. Google’s Android platform picked up 4 percentage points to a 13% share.

The cost to Apple of replacing iPhone4 phones, if the problem is a hardware issue, is about $100 million, Sterne Agee estimates. That seems like a small bite of Apple’s $13 billion to $15 billion quarterly revenue run rate

 But a bigger problem than replacement costs is the effect that the bad publicity might have on sales just ahead of the back-to-school and holiday shopping seasons. Apple will need to scurry to get the problem resolved in that time frame, especially given the complexity of Apple’s out-sourced supply chain for the iPhone.

The drop in market share, on the other hand, is likely to fix itself. Read more

Apple has completely disrupted the technolgy sector: Can anybody else play this game?

It’s war. Full out war. Savage your former allies war. To the victor go the spoils war. To the death war.

It’s Google (GOOG) against Hewlett Packard (HPQ) against Microsoft (MSFT) against Dell (DELL) against Lenovo (LNYGY) against HTC against Amazon.Com (AMZN)—and, of course everybody against Apple (AAPL).

Apple hasn’t left competitors any choice. Its iPod and iPhone and iPad have completely disrupted the Windows/Intel model that once ruled the computer world. The disruption has been so thorough that Apple has replaced the old model with its own. Now it’s compete on Apple’s terms or become irrelevant.

Need some proof? On April 28 Hewlett Packard bought wireless phone pioneer Palm (PALM) for $1.2 billion—a premium of 23% to the share price. For its money Hewlett Packard got a phone maker headed to bankruptcy with a revamped product line that no one was buying—and what is by all accounts a really good operating system, webOS.

For all intents and purposes Hewlett Packard, a long-time partner with Microsoft that had for years built everything from PCs to lap tops to note books on Microsoft’s Windows operating system and that was set to roll out an iPad killer tablet built on Microsoft’s operating system , spent $1.2 billion to buy an operating system.

That’s how much Apple has changed the terms of battle. Read more