Source: U.S. Census Bureau, Durable Goods Report

In “Surging Crude Means Picking Shrewd” why did Christopher Zook praise Applied Materials?

“The best idea right now would be Applied Materials (AMAT - Annual Report),” he said.  “We believe there’s a tremendous growth opportunity there in the solar business, as well as the economy begins to recover in 2009 and 2010, they’re going to get strength in their core businesses as well.”

Eventually the semiconductor firms will start ordering again. Meanwhile, solar is too small to register much, in my opinion.

Disclosure: William Trent has a long position in SMH.

On Friday, Rebecca Darst said options traders are looking at chips. What reason(s) did she cite?

Here’s the video.  It seems to me like she mentions Infineon’s (IFX) guidance cut, a recent Barron’s article and TI’s (TXN - Annual Report) lukewarm share price. In other words, all of the above.

Infineon doesn’t show up on my screens and Texas Instruments ranks pretty neutrally. I personally think the semiconductor industry should do well, and own the Semiconductor HOLDRs (SMH) and Maxim Integrated Products (MXIM.PK) - though the latter position is a little stub spun out from the SMH when the company was delisted.

Disclosure: William Trent has a long position in SMH.

In “Future Trade: Web 5.0″ what Un-”sexy” stock did Jeff Macke recommend?

I’d play Intel (INTC - Annual Report) says Jeff Macke. It’s not sexy but Intel seems to survive.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

Short Seller Trivia: In the May 1 “Market Insider” blog, which green stock did shorts want badly?

There is also interest by short sellers in Canadian Solar (CSIQ) and SunPower (SPWR) and they were in the top 10 stocks being sought this week, says John Tabacco, ceo of Locatestock.com.

Disclosure: At time of publication, William Trent has no financial position in Canadian Solar (CSIQ) or SunPower (SPWR).

MEMC (WFR) reported first quarter net sales of $501.4 million versus fourth quarter 2007 net sales of $535.9 million and first quarter 2007 net sales of $440.4 million. Non-GAAP diluted EPS, excluding warrants, was $0.84 per share, compared to the consensus analyst estimate of $0.85.

As previously disclosed, the impact associated with the accelerated chemical deposit buildups at the company’s Pasadena, Texas polysilicon manufacturing facility was the primary factor contributing to the sequential reduction in volumes, revenue and gross margin.

The problems in Pasadena continued after yesterday’s report. “The company reported that at approximately 4:20 PM this afternoon a transfer line from a transport vehicle developed a leak and caused a release of STF, a raw material gas used in the manufacturing process. The leak was quickly contained by the on-site emergency response team and the flow of material was stopped. At this time the company does not believe there was any offsite impact from the release due to the quick dissipation of the material in the atmosphere. Approximately 18 people were transported to area hospitals for further evaluation and/or treatment.”

During the first quarter, the company generated operating cash flow of $197.2 million, compared to $238.5 million in the 2007 fourth quarter. Capital expenditures for the first quarter totaled $81.9 million, or 16.3% of sales. The resulting lower trailing 12-month free cash flow yield curbs my enthusiasm for WFR shares.

“Although we are pleased with the results of the actions we have taken to address the issues that caused the lower than targeted polysilicon volume in the first quarter, given the unplanned issues that were encountered with our expected polysilicon ramp in the first quarter, we feel it is prudent to be extra cautious regarding our polysilicon output expectations in the second quarter. As a result, we are targeting revenues of approximately $540 to $570 million for the second quarter. In addition, we are targeting gross margin of approximately 54%-55%, with operating expenses of less than $40 million,” added Gareeb.
The consensus sales estimate for next quarter was $566 million.

The stock is looking to open down today, but I think if it can maintain above its 200-day moving average it will signal that investors continue to view the disruptions as temporary. Below the 200-day moving average, I’d say all bets are off.

Disclosure: At time of publication, William Trent holds no financial position in the companies mentioned in this article.

My latest column is up at RealMoney. In it, I explain why I think the recent rally in semiconductor stocks should continue.

First, as I have mentioned before, the supply/demand balance remains favorable.

Second, pricing power appears to be improving, based on the most recent PPI report.

I think the names that will perform best are those whose gross margins are currently depressed, as improving margins would result in accelerating earnings power.

Disclosure: At time of publication, William Trent holds shares of SMH and MXIM, as well as put options against the shares of LRCX.

Disclosure: William Trent has a long position in SMH.

According to Digitimes, Polysilicon spot price drops 20% in two weeks:

Most industry players buy expensive polysilicon because they have scrap materials to mix with it, the sources explained. Most of these scrap materials are sourced from semiconductor companies, with overall volume being very limited. The brisk demand from the solar sector has also led to a surge in the price of scrap materials from US$100-200 per kilogram in 2006 to US$200-300 per kilogram in 2007. The average price of scrap materials currently is above US$300 per kilogram.

Tight polysilicon supply, combined with favorable long-term contracts with solar players, is a key reason MEMC Electronic Materials (WFR) is my favorite semiconductor play. I think the current situation, where the price went so high as to actually reduce demand, will be short-lived. Longer term, the supply and demand will meet at a clearing price. As long as the price is a solid one, MEMC should benefit.

Disclosure: At time of publication, William Trent has no position in the companies mentioned.

Disclosure: William Trent has a long position in SMH.

According to Renewable Energy World, researchers at the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) announced that they have moved closer to creating a thin-film solar cell that can compete with the efficiency of the more common silicon-based solar cell. The Copper Indium Gallium Diselenide (CIGS) thin-film solar cell recently reached 19.9% efficiency in testing at the lab, setting a new world record, according to NREL.

The CIGS technology, used by privately held Nanosolar, differs from the Cadmium Telluride in use by First Solar (FSLR). Amorphous silicon and cadmium telluride currently account for 95% of the thin-film panels made, according tot the Department of Energy.

While it is likely that the various technologies will leapfrog each other over time, the latest study will doubtless help Nanosolar in its ongoing quest for capital.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned.

MEMC Electronic Materials (WFR)  reported that during the first quarter it experienced accelerated buildup of chemical deposits inside the new expansion unit (”Unit 3″) at its Pasadena, Texas facility and delayed maintenance on its other two units as a result. The combination of these items caused the utilization of the Pasadena facility to be approximately 20% lower than the fourth quarter, resulted in much lower than anticipated output, and caused the company to not achieve the financial targets for the first quarter as disclosed on January 24, 2008.The company now anticipates revenue for the first quarter will be approximately $500 million with gross margin of approximately 52% and operating expenses of approximately $42 million. This compares to the company’s previously announced targets of $560 million in revenue with gross margin of approximately 54.8% and operating expenses of approximately $42 million.

To me, this does not affect the long-term prospects for MEMC a bit. It does, however, illustrate that there are always risks to doing business. Many of these risks are not fully anticipated by investors.

If MEMC is riskier than investors previously thought, the stock decline is simply a result of applying a more appropriate discount factor for risk. If investors were close to the correct risk premium in previous estimates, I would expect the price to recover quickly.

Either way, it would not affect my own willingness to hold the stock, as I tend to believe these things happen more often than most people expect.