I'm indecisive about Applied Materials (NASDAQ: AMAT). The semiconductor company, which also works with solar photovoltaic cells, is starting to look like a good trade to me. However, I still shudder when I examine the numbers. What I've got to keep telling myself, I guess, is that the market is a discounting mechanism, and that now may be the time to act.

According to the press release, which was issued after the market closed on Tuesday, net sales decreased 39% in the third quarter. Adjusted earnings came in at 0 cents per share. That was obviously much less than the 17 cents per share earned one year ago. According to Reuters, which made a further adjustment for equity-based compensation, Applied Materials lost 3 cents per share. The market was expecting a loss of 8 cents per share. The top line beat projections as well.

Texas Instruments (NYSE: TXN), whose peers include Qualcomm (NASDAQ: QCOM), Advanced Micro Devices (NYSE: AMD), and Intel (NASDAQ: INTC), reported results for the second quarter after the bell on Monday. As can be expected, the statistics weren't great. However, there were a couple silver linings.

Revenues declined 27%. Earnings per share dropped a whopping 55%, coming in at 20 cents. Excluding items, Texas Instruments made 25 cents per share. Reuters says this is two pennies above analyst expectations.

Applied Materials (NASDAQ: AMAT) reported Q2 numbers earlier in the week. They were dismal, to say the least. According to Jon Ogg's Closing Bell on Wednesday, the semiconductor business saw its top line reduced by 50%, and the adjusted loss came to 10 cents per share. Yes, yes, that met expectations. So what? The article also mentioned that the solar operation wasn't doing so hot.

Looking through the actual earnings release, I don't see a lot of things that would make a shareholder happy. Backlog was down. Applied Materials had to use cash to keep things going over the last six months (obviously investors would rather see cash generated from operations). And CEO Mike Splinter described the current climate as very tough in terms of customer demand.

Xilinx (NASDAQ: XLNX), a tech entity involved in programmable logic and a colleague of companies like Actel (NASDAQ: ACTL) and Altera (NASDAQ: ALTR), issued a business update on Tuesday. Believe it or not, it contained some good news. How about that for a change? I'm sure shareholders were pleased.

According to this news item, Xilinx believes that its revenue picture should be better than previously thought. Sales should drop by somewhere between 13% and 18% for the March quarter on a sequential basis. Management had originally believed that they'd have to report a sequential revenue drop between 15% and 25%. So, yes, there will still be a decline, but hey, if it's less than expected, you gotta take that. It's too bad, though, that the gross margin range wasn't raised. It should still fall between 61% and 63%. If management had raised that as well, then I bet the stock would have closed even higher on the news. It rose almost 4% on better-than-average volume yesterday.

Last week, the Semiconductor Industry Association (SIA) announced that worldwide semiconductor sales dropped to $17.4 billion from $22.3 billion in December, a drop of 22%. Compared to November, December's sales were 16.6% lower. For comparison, November 2007 chip sales fell only 10%.

SIA President George Scalise noted that weakened demand for automotive products, personal computers, cell phones, and corporate information technology products. However, Scalise said the largest revenue declines were "in the memory sector where price pressure more than offset significant growth in total bit shipments."

Applied Materials, Inc. (NASDAQ: AMAT) is set to post earnings tomorrow, with estimates calling for the company to lose a penny per share in the latest quarter. According to Bloomberg, the company expects to report earnings that range from break-even, to a loss of two cents with the range from analysts checking in being between a gain of eight cents to a loss of a penny.

AMAT is the world's largest producer of semiconductor production equipment, and its report could certainly set the tone for trading in the sector. The firm has already tempered expectations for the results, announcing that it expects revenue to fall 35% for the quarter, thanks to numerous factors, including the economy and slumping demand. Couple the economic situation with a worldwide slowdown in demand (the first year-over-year drop since 2001), and the situation doesn't look great for AMAT.

This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.

George Putnam is the newsletter advisory industry's leading authority on distressed stocks and turnaround situations. In his The Turnround Letter, he looks to semiconductor firm Teradyne (NYSE: TER), his top 2009 pick.

"Founded in 1960, Teradyne is the leading maker of automated semiconductor testing equipment. It also produces testing equipment for circuit board assemblies, aerospace and defense instruments, and automotive systems.

"The current short-term prospects for the semiconductor industry are weak, and so many of the chip stocks are down hard. Testing is a key element of semiconductor production, and so the testing equipment producers will prosper when the chip makers rebound.

"Teradyne has been the dominant player in the semiconductor testing market for quite a while and over the last couple of years the company further solidified its leadership position by acquiring competitors and buying back stock.

The shares of chipmaker Cypress Semiconductor Corporation (NYSE: CY) are getting hammered today after the company warned that it will swing to a fourth-quarter loss. In a statement, Cypress cited "declining order patterns and turns from all sales channels, all end markets, all geographies, and all of our product lines. In addition, backlog continues to be weak, and we are seeing cancellations and requests for push-outs that are somewhat higher than normal."

The firm now expects to record a quarterly loss of 3 cents to 12 cents per share on sales of $165 million to $180 million. As recently as mid-October, Cypress expected to book a profit of 4 cents to 7 cents per share in the fourth quarter, with sales totaling $194 million to $204 million.

Cypress is hardly the first chip firm to fall on hard times in the current macro environment. The market has already been hit this week with a similar warning from Dow component Intel Corporation (NASDAQ: INTC), while National Semiconductor Corporation (NYSE: NSM) slashed its outlook and announced job cuts.

This afternoon, CY is down roughly 20%, and it's trading less than a point above its current annual low of $2.93. The chip company's warning sparked a rush in the options pits; so far, Cypress has seen more than 6 times its average daily put volume cross the tape. The bulk of these bearish bets have changed hands on the November 4 strike, which has seen volume of 2,113 contracts on open interest of 6,509.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

I was checking out Applied Materials (NASDAQ: AMAT) today to see how the stock was reacting after its earnings report. At the time I began writing this, the shares were up over 3% to $10.25 per stub; as I was about to send it off to be published, it was up over 5% to $10.49. The market is kidding me, right?

Melly Alazraki reported on the company's data this morning. The $0.20 per share in adjusted earnings booked for the fourth quarter beat expectations by three pennies. Yeah, I know, beating estimates is the big game on Wall Street. And yes, it is a good thing. However, not every earnings-beat is equal. You have to look at each business carefully and evaluate it relative to the macro environment. Applied Materials will be cutting 1,800 jobs. The market likes that, of course, and believes that cost savings will help profits down the line. However, cutting jobs isn't necessarily a sign that a business is about to get stronger; sometimes, it means the opposite. Also, top-line sales declined by double digits, and with bad news coming from Intel Corporation (NASDAQ: INTC), we know that the slowdown is going to get worse. Furthermore, the market drop earlier today is confirming that bad times will be with us for a while.

In that context, I can't see buying Applied Materials. I mean, up 5%? I know the argument -- you've got to start discounting better times and pick up shares when their cheap. Yeah, right. It is true that the market will do that at some point but we're not there yet. Back in August, I wrote about Applied Materials' Q3 numbers. The stock was higher at that point, and it was working off a higher 52-week low. Now, things have turned south on both counts. And I think they could go further south. At a time when even buying Microsoft Corporation (NASDAQ: MSFT) is an exercise in fear-management, I don't think Applied Materials is a tech stock that should be on anyone's list of investment ideas.

Disclosure: I don't own any company mentioned; positions can change at any time.

After the closing bell last night, silicon-wafer producer MEMC Electronic Materials (NYSE: WFR) offered a mid-quarter update that's sent the shares reeling into negative territory this morning. The report started auspiciously enough, as CEO Nabeel Gareeb noted that current production rates "could allow us to achieve results in the upper half of our targeted financial range" of $560 million to $620 million in revenue.

His comment seemed to indicate that MEMC might exceed analysts' expected revenue of $596.7 million, as reported by Thomson Financial. But Gareeb then tempered his optimism by adding, "However, there is increased softness in demand from semiconductor applications customers, primarily due to their inventory reduction initiatives. These elements warrant a continued degree of caution in our outlook, given the amount of time left in the quarter."

Additionally, MEMC warned that it expects operating expenses of approximately $43 million for the third quarter, up from its previous projection of $41 million. The increase is largely attributable to one-time, non-cash severance-related expenses.

This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.

"I think Wall Street has made a poor assessment of Analog Devices (NYSE: ADI)," says Paul McWilliams. Here's a look at the chip maker from his technology-focused newsletter, Next Inning.

"Analog Device's top line guidance came in a bit below Wall Street expectations. However, I think the problems are between the Hudson and East Rivers and not in Norwood, Massachusetts, the hometown of Analog.

"What Wall Street appears to be missing is that since ADI has sold off some of its lower profit business units, its seasonal sales patterns have changed. ADI is now again driven by industrial market sectors much more than it was even just last year.

"Therefore, its conservative guidance of flat to up 3% sequentially shouldn't have been a big surprise nor a cause for concern. As a matter of fact, with its minimal exposure to PC and consumer markets, I think flat to up 3% is pretty good.

"What Wall Street would be better to focus on are the operational improvements ADI has made. In its July quarter, ADI improved its pro forma operating margin to 26.5% from 26.2% last quarter and again reduced its inventory, which sits now at the lowest level we've seen since 2004.

Applied Materials (NASDAQ: AMAT), a technology company that provides solutions to industries involved with such things as semiconductors, flat panel displays and solar photovoltaic cells, and whose colleagues include KLA-Tencor (NASDAQ: KLAC) and LAM Research (NASDAQ: LRCX), reported earnings for the third quarter on Tuesday.

They weren't great. The top line decreased by 28%, coming in at $1.8 billion. Adjusted earnings per diluted share dropped well over 50% to 17 cents. Although these numbers are horrible, it should be noted that the company at least beat estimates of 14 cents per share.

Well, not to be a downer or anything, but Applied Materials is not the tech stock I want to be in right now. It is suffering through a dismal economic environment, and the growth rates just don't look good. Not only do you have these year-over-year declines, but you've also got sequential-quarter statistics showing a negative trend. Plus, new orders are down significantly, and the gross margin took a dive.

Is there any saving grace to the report? Yes. Cash flow from operations was essentially flat over the nine-month timeframe at almost $1.6 billion. Hey, flat is better than a decline, correct?

Semiconductor company Texas Instruments (NYSE: TXN) reported results for the second quarter, and the stock sold off during the after-hours session on Monday. At one point shares were down 11%.

I can sort of see why this happened. It wasn't an exciting earnings release at all, especially in a bad market. First, the top line decreased by about 2% to $3.35 billion. Earnings from continuing operations on a diluted basis grew by only 5% to 42 cents per share. Operational cash flow declined by 42% to $520 million. Nope, not my kind of earnings release, let me tell you. Texas Instruments doesn't seem to have the right stuff in terms of bottom-line growth. Management pointed out that the challenging economy has led to weak demand. Also, let me add that, according to this article, the results missed estimates by two pennies.

I don't really want to own Texas Instruments here. If I had to buy a tech stock, I'd be more inclined to look at a Microsoft (NASDAQ: MSFT) or an Apple (NASDAQ: AAPL). Apple also reported earnings on Monday and saw its shares slide after delivering a much stronger quarter than the one delivered by Texas Instruments. That about says it all, doesn't it?

Disclosure: I don't own any company mentioned; positions can change at any time.

Lately, there have been some scary stories -- such as in BusinessWeek and Forbes.com -- about the buyout of Freescale, which is a major semiconductor operator (the transaction came in September 2006 at $17.6 billion).

The latest earnings report was anemic. Plus, the company's bonds are selling at distressed levels. In fact, the CEO -- Michel Mayer -- quit his post in February (but don't cry for him as he took millions in a nice payday). And of course, Freescale's key customer, Motorola, Inc. (NYSE: MOT), is ailing.

So, might this prevent further buyout deals in the semiconductor space?

MOST NOTEWORTHY: Semiconductors, ADC Telecomm and Nationwide Financial were today's noteworthy upgrades:

• Banc of America upgraded the Semiconductor Sector to Overweight from Market Weight citing indications of a bottom given earnings estimate revision momentum and supply chain inventory levels. The firm upgraded Intel (NASDAQ:INTC), Power Integrations (NASDAQ:POWI) and Semtech (NASDAQ:SMTC) to Buy from Neutral and PMC Sierra (NASDAQ:PMCS) and LSI Corp (NYSE:LSI) to Neutral from Sell.
  
• Deutsche Bank upgraded shares of ADC Telecomm (NASDAQ:ADCT) to Buy from Hold as they believe April consensus estimates could prove conservative.
  
• UBS raised Nationwide Financial (NYSE::NFS) to Buy from Neutral and believes a higher offer by Nationwide Mutual is likely.

OTHER UPGRADES:

• Halliburton (NYSE:HAL) was upgraded to Buy from Neutral at Goldman.
  
• Westlate Chemical (NYSE:WLK) was raised to Overweight from Equal Weight at Morgan Stanley.