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IBM blue, Intel rosy
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October 18, 2000: 6:42 p.m. ET
IBM plunges, Intel gains, and Sun releases its earnings too early
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NEW YORK (CNNfn) - Shares of IBM plunged Wednesday after the computer giant reported disappointing third-quarter revenue, causing the Dow Jones industrial average to lose as much as 435 points at one point during the day.
But Big Blue was fairly isolated in its misery. The technology-heavy Nasdaq composite index, down as much as 187 points early in the day, rallied to close down 42.40 points at 3171.56, helped by strength from chip giant Intel.
IBM shares plunged $17.56 to close at $95.44, a 15.54 percent loss, Wednesday after the computer and software company met third-quarter earnings estimates but fell short of its revenue target. IBM's (IBM: Research, Estimates) revenue increased a weak 3 percent to $21.8 billion from $21.14 billion in last year's third quarter. Revenue was up 6 percent when measured in constant currency terms. While revenue growth was slower than IBM and analysts had expected, it was the first quarter in 2000 in which the company's revenue increased from the comparable period last year.
"We would like to have seen more revenue in the quarter, but we were held back by three items," IBM Chairman and CEO Louis Gerstner said after Tuesday's close. "First, demand for our microelectronics products -- from both outside customers and internal IBM customers -- far outstripped our ability to supply components. Second, the upcoming release of our new high-end server slowed demand for the System/390 family of servers. Finally, parts of our software business slowed unexpectedly in September."
 "We are lowering our future revenue estimates modestly, which causes a slight decline in our earnings-per-share assumptions," said CS First Boston analyst Kevin McCarthy in a research note. "Our fourth-quarter earnings estimate now is $1.45, down a penny, and our 2001 estimate is $4.90, down from $4.95."
"We reiterate our 'hold' rating and note that the third quarter was supposed to mark the start of very easy revenue comparisons, and 3 percent revenue growth does not give the bulls much to work with," McCarthy added.
Among other computer hardware stocks, Compaq (CPQ: Research, Estimates) was up $1.45 at $25.20, Hewlett-Packard (HWP: Research, Estimates) lost $4.94 to $85.56, Gateway (GTW: Research, Estimates) gained 23 cents to $50.05.
Intel beats estimates
Intel (INTC: Research, Estimates) was singing a happier tune than IBM's blues Wednesday, closing up $2 to $38.19.
Excluding one-time items, Intel said it earned $2.9 billion, or 41 cents per share. That's up from an operating profit of 28 cents per share during the same period last year, and 3 cents better than the 38 cents per share that analysts polled by First Call had expected Intel to earn during the most recent quarter.
Piper Jaffray analyst Ashok Kumar issued a research note Wednesday that had mixed view's about Intel's future results. However, the analyst concluded that Intel's stock is likely to rise from its current level.
"If fundamentals do not deteriorate in the December quarter, the stock should bounce back to the two-year line, in the $43-to-$44 area," Kumar wrote. "If its outlook continues to improve, over the next six months we expect the stock to fill the gap in the $50-to-$55 area."
Other semiconductor and semiconductor equipment stocks gained Wednesday, with Altera (ALTR: Research, Estimates) surging $4.25 to $34.63, and Novellus (NVLS: Research, Estimates) adding $2.87 to $34.56.
Texas Instruments (TXN: Research, Estimates) was an exception to that trend, however. The company's stock declined $3.31 to $36.88 after Lehman Brothers analyst Daniel Niles downgraded it to "neutral," saying that semiconductor revenue growth was likely to come under pressure. Texas Instruments is scheduled to report its third-quarter earnings after the close Wednesday.
"We believe that TI saw some significant order cancellations occurring late in the quarter from some, if not all, of the top three wireless handset vendors," Niles said in a research note. "We believe that GSM handsets in Europe are not selling well and, as a result, Ericsson canceled components for GSM handset orders to TI as they did with all of their other suppliers late in the third quarter."
TI is the world's largest supplier of digital signal processors, or DSPs, and analog semiconductors, which are some of the most important components used in consumer electronics such as digital cellular phones and high-speed Internet access devices. Some market watchers estimate that TI supplies as much as 65 percent of the chips in mobile phones worldwide.
Sun releases too early
Sun Microsystems (SUNW: Research, Estimates) reported a fiscal first-quarter profit Wednesday that beat Wall Street's expectations, on sales that rose 60 percent from the year-earlier period.
But the better-than-expected earnings were not the only surprise out of the Palo Alto, Calif.-based company. The earnings release was inadvertently posted on Sun's Web site earlier in the day and then quickly removed. After the results, which had been set for release after the market closed, were posted by several news services, Sun distributed the release through the regular channels.
In both releases, Sun, the world's leading supplier of network servers, said it earned $510 million, or 30 cents per share, during the quarter. That's up 85 percent from a year ago and 4 cents better than the 26 cents per share analysts polled by First Call had expected.
The company's stock closed down $1.06 at $110.31.
PeopleSoft gains
Shares of PeopleSoft (PSFT: Research, Estimates) soared $8.44 to close at $41.19 Wednesday, after the business management software provider turned in third-quarter earnings that beat Wall Street expectations. The company also announced plans to buy back $100 million of its stock and promoted its chief financial officer to senior vice president.
 PeopleSoft posted earnings of $23.4 million, or 8 cents per share, compared with $500,000, or zero per share, during the same period a year ago, beating analysts' estimates by a penny.
Following the results, Lehman Brothers analyst Neil Herman reiterated his "buy" rating on PeopleSoft shares and boosted its price target to $44 a share from $30. Herman also upped his 2000 and 2001 revenue and earnings estimates.
Covad, RF Micro, Copper Mountain plunge
Several smaller technology names plunged Wednesday on earnings-related news, including Covad Communications, RF Micro Devices, and Copper Mountain.
Covad (COVD: Research, Estimates), a provider of digital subscriber lines for high-speed Internet access, plunged $5.03 to $3.56, a 58.55 percent loss, after it reported a net loss for the third quarter of $189.9 million, or $1.22 per share, compared with a loss of $54.1 million, or 47 cents per share, in the year-ago quarter. Analysts had expected a loss of $1.18 per share, according to First Call. Revenue increased to $66.7 million from $19.1 million in the year-ago period.
Copper Mountain (CMTN: Research, Estimates) plunged $17.03 to $9.84, a 63.37 percent loss, on Wednesday. The supplier of high-speed digital subscriber line products announced third-quarter earnings that edged higher than estimates, but also noted that its fourth-quarter and 2001 earnings would fall short amid a downturn in demand from its customers.
The company warned that, in light of recent reductions in capital expenditure forecasts from many of its customers, it expects fourth-quarter revenue near $60.0 million and pro forma earnings per share of 4 cents-to-6 cents a share. The First Call estimate for the company's fourth quarter was 28 cents a share.
RF Micro Devices (RFMD: Research, Estimates), a maker of radio frequency integrated circuits for wireless communications applications, dropped $8.75 to $14.25 after it reported second-quarter revenue that was short of estimates and said it expects its third-quarter revenue to be 20 percent below the same period last year because of a slowdown in orders.
CS First Boston analyst Charlie Glavin lowered his fiscal 2001 estimate for RF Micro to 31 cents from 43 cents and his fiscal 2002 estimate to 43 cents from 62 cents. 
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