Techs decline again

September 5, 2001 Posted: 2038 GMT

NEW YORK (CNNfn) -- Technology stocks finished broadly lower Wednesday, with a less-than-optimistic outlook from Alcatel weighing on telecom equipment suppliers and positive comments from Texas Instruments doing little to boost chipmakers.

Before the U.S. markets opened, Alcatel, a leading supplier of telecommunications equipment, warned it may not deliver an operating profit in 2001. Most analysts polled by First Call, which tracks corporate earnings forecast, recently had expected the French company's profit for the year to come in at around 62 cents per share.

After plunging nearly 9 percent on the Paris Stock Exchange, Alcatel's (ALA: down $1.08 to $13.62, Research, Estimates) American depositary shares continued to slide in New York Stock Exchange trade, sliding another 7 percent.

Although he did not explicitly say the company will post an operating loss, Serge Tchuruk, Alcatel's chief executive, told an investor conference that the market conditions will make logging black ink for the year "a challenge."

Makers of telecommunications and data-networking equipment have been among the hardest hit by economic weakness which has prompted services providers and large corporations to pare back their capital spending plans.

The slowdown at first appeared to be centered in the United States. But in recent months, many companies have reported the weakness spreading to other regions as well.

Shares of Britain's Marconi (MONI: down $0.32 to $1.14, Research, Estimates) fell more than 20 percent. The cash-strapped, debt-laden company on Tuesday ousted both its chief executive and chairman and issued a profit warning of its own.

At the same time, shares of Sweden's Ericsson (ERICY: up $0.06 to $4.07, Research, Estimates), the No. 1 supplier of wireless infrastructure equipment and the No. 3 maker of mobile phones, took back some of their losses. Ericsson stock fell nearly 20 percent on Tuesday after executives said they see no clear signs of a recovery in the market next year.

Most of the U.S.-based telecom equipment makers followed Alcatel and Marconi lower. Shares of Nortel Networks (NT: down $0.33 to $5.67, Research, Estimates), Ciena (CIEN: down $1.04 to $14.01, Research, Estimates), and Lucent Technologies (LU: down $0.28 to $6.24, Research, Estimates) all settled in the minus column.

The stocks of data-networking equipment suppliers also moved broadly lower.

Shares of Cisco Systems (CSCO: down $0.89 to $14.88, Research, Estimates), a leading supplier of the equipment used to guide traffic over the Internet, fell more than 5 percent. At the same time, shares of Sun Microsystems (SUNW: down $0.32 to $10.63, Research, Estimates), a top supplier of Web servers, fell nearly 3 percent.

Both those stocks were among the most actively traded on the tech-heavy Nasdaq composite index, which finished 11.77 points lower at 1,759.01. The American Stock Exchange's networking index fell 13.82 points, closing 5.2 percent lower at 253.53.

In the semiconductor segment, shares of Texas Instruments (TXN: down $1.26 to $30.84, Research, Estimates), whose chips are used in roughly two-thirds of the world's mobile phones, fell 3.8 percent. The decline came even after the company said it is on track to meet its financial targets for the third quarter. By First Call's count, expectations currently are for a loss of 4 cents per share on $1.8 billion in sales.

Elsewhere among chipmakers, shares of Intel (INTC: up $0.62 to $27.47, Research, Estimates) finished 2.4 percent higher. The company, which is the No. 1 supplier of PC microprocessors and flash memory chips, is scheduled to host a mid-quarter financial update teleconference after the close of trading Thursday.

When Intel reported its second-quarter results on July 17, executives told analysts to expect the company's third-quarter revenue to range between $6.2 billion and $6.8 billion, and its gross margin, the percentage of sales remaining after subtracting product costs, to be 47 percent, plus or minus a couple of points. Both those numbers were slightly below Wall Streets general expectations at that time.

They did not provide a specific per-share earnings estimate. Analysts on average are expecting the company to turn a profit of 10 cents per share on roughly $6.4 billion in revenue, according to First Call.

Most other chip stocks moved lower. The Philadelphia Stock Exchange's semiconductor index fell 9.1 points to 534.56, a 1.7 percent decline on the day.

Shares of Compaq (CPQ: down $0.67 to $10.41, Research, Estimates) and Hewlett-Packard (HWP: down $0.66 to $18.21, Research, Estimates) continued to decline a day after the two companies announced that they would join forces in a $25 billion merger deal.

Following the announcement, analysts voiced concerns about how the two companies would be able to smoothly integrate their operations and cautioned that a less-than-smooth transition could result in lost market share, especially in the PC market.

Shares of Dell Computer (DELL: up $0.07 to $22.38, Research, Estimates) and Gateway (GTW: up $0.01 to $8.93, Research, Estimates), two of HP and Compaq's top rivals in the PC market, each finished higher.

At the same time, shares of IBM (IBM: down $1.14 to $100.35, Research, Estimates), which would have only a narrow lead over the combined HP and Compaq as the world's largest computer hardware maker, pulled back.

The Goldman Sachs computer hardware ended the session 8.32 points lower at 214.37, a 3.7 percent decline.

Elsewhere in the technology sector, shares of Motorola (MOT: down $1.09 to $16.40, Research, Estimates), the No. 2 supplier of mobile phones and a leading semiconductor maker, fell more than 6 percent. Merrill Lynch on Wednesday cut its rating on Motorola's shares to "neutral" from "accumulate," citing continued weakness in the mobile phone market.

Shares of Finland's Nokia (NOK: down $1.15 to $13.85, Research, Estimates), the world's largest mobile phone maker, ended the session more than 7 percent lower as well.

Note: Search results will open in a new browser window