Short sellers are moving into tech stocks at a rapid pace, in many cases probably betting that falling PC sales will hurt earnings at some big companies. Based on recent data on global computer shipments, the gamble will probably pay off.
For the period ending on January 15, shares sold short in Microsoft (NASDAQ: MSFT) rose 18% to 92.4 million compared with the precious two weeks period, according to The Wall Street Journal, Shares sold short in Dell (NASDAQ: DELL) moved up 15% to 60.5 million shares.
There are many reasons to believe that PC sales, and with them the sales of software, will get much worse as the year goes by. Consumers have little access to credit for expensive purchases. Businesses would rather keep people employed and cut other costs.
To some extent, companies like Dell are their own worst enemies. PCs can work well for three or four years. Processors are powerful enough so that upgrades probably do little to help the average user with basic tasks.
The PC industry is going to fall apart at a rate that could not be imagined a year ago. The investors who make money will be those who bet on the down side.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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