Tickers in this Article: INTC, DELL, NVDA, MRVL, QCOM, ATML, ONNN
It is good practice for investors to cast their information nets as wide as possible to monitor their holdings and make better investment decisions. To that point, although Dell (Nasdaq: DELL) did not have a bad recent quarter, some semiconductor investors may not be so happy with some of the details. Reading tea leaves like this is hardly a perfect science, but there were a few scattered details that could become a problem.


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PC, Or Not PC?
In many respects, Dell had a solid quarter. Margins were particularly strong and the company produced solid operating leverage. Looking through to what drives chip demand, though, the picture gets a little bit murky. Overall, desktop sales rose 21% annually but fell 6% sequentially and notebook ("mobility") sales were up 16% and 3% for those same respective periods. Moreover, stripping ASP growth out of the equation makes the unit growth a little more concerning.

On top of all that, management's comment that the "refresh cycle is in full bloom" is a little odd, given that sequential guidance for the fourth quarter was not that great. Again, this is
not about Dell's performance - the issue is whether or not there is still solid PC and notebook demand sufficient to power the chip stocks that supply the market. (For more, see 4 Cheap, High-Quality Stocks.)

Bad News From Tablets And Phones?
Listening to companies like Apple (Nasdaq:AAPL), Google (Nasdaq:GOOG), Samsung, Atmel (Nasdaq:ATML) and Qualcomm (Nasdaq:QCOM), it seems pretty apparent that there is still very strong demand for smartphones and tablet-type devices. That can readily be seen as bad news for PCs; not only is there only so many dollars to go around for the gadgets, but the more these next-gen devices can replicate (or obviate) PCs and notebooks, the worse the outlook for chip companies who do not double-dip into each market.

Winners And Losers
Intel (Nasdaq:INTC) stands out as an obvious dependent of a healthier PC/notebook environment. True, the company is trying to get deeper penetration into the smartphone and tablet markets, but that is not going to happen for the Christmas season. Likewise, AMD (NYSE:AMD) and Nvidia (Nasdaq: NVDA may well have solid long-term options and outlooks, but fears of a grey Christmas in their core markets may keep investors at bay.

Ultimately, everything could work out fine. Maybe Best Buy and Wal-Mart manage to move plenty of computers on Black Friday and there is a solid re-order cycle in the fourth quarter. Certainly that would be a boon for Marvel (Nasdaq:MRVL) and LSI (NYSE:LSI).

On the other hand, there seems to be no shortage of demand for the alternatives, and that could mean a merry holiday for those suppliers, including Texas Instruments (NYSE:TXN), Qualcomm, and Atmel - all of which are basically at (or very near) 52-week highs.

The Bottom Line
Here is a chance for investors to play true to their type. Growth investors are almost certainly going to stick with the phone/tablet players, as that is where the near-term momentum and positive guidance are today - Atmel, for instance, is seeing estimates heading nicely higher, while AMD is seeing them chopping lower. Value hounds, though, might see this dip in PC-related chips as a reasonable buying opportunity for quality names. And then you have the GARP folks, who just may want to investigate a name like ON Semiconductor (Nasdaq: ONNN) - a quality small chip company with enough PC exposure to get some of the backlash, but enough non-PC business to perhaps stand out as an under-appreciated grower. (For more, see The Value Investor's Handbook.)

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