JDS guidance hurts techs
Profit warning spooks investors; semi sector falls for second straight session
NEW YORK (CNNfn) - U.S. technology stocks faltered Tuesday with disappointing guidance from JDS Uniphase weighing on fiber-optic issues, while a drop in orders for chip equipment hurt the semiconductor sector.|
The Nasdaq composite index, which is weighted heavily with technology names, slid 42.71 points to 2,016.61.
"It's causing a lot of investor uncertainty,"† Gregory Geiling, telecom analyst with J.P. Morgan, told CNNfn's Street Sweep. " I think we'll be on the path to recovery going into the third quarter but the question becomes what is the order of magnitude of that recovery Ė right now that's anybody's guess."
Shares of JDS Uniphase (JDSU: down $3.36 to $20.82, Research, Estimates), the No. 1 supplier of the components used to build fiber-optic networks, were the second most actively traded on Nasdaq. The shares fell sharply after JDS reported quarterly results that met Wall Street's lowered expectations and warned that its profit in the current quarter will amount to less than half what it had previously anticipated.
The company also announced a restructuring plan, including cutting† 5,000 jobs and closing a number of facilities, which it said will result in annual cost savings of $250 million.
JDS' earnings release had not been expected until later in the week. The company issued a press release late Monday, saying only that it would host a conference covering "important developments."
That led to speculation on Wall Street that JDS would say it planned to buy the fiber-optic cable unit of Lucent Technologies (LU: up $1.05 to $10.25, Research, Estimates), whose shares were trading sharply lower after no such announcement was made and Lucent itself reported a wider-than-expected quarterly loss.
Other fiber optic stocks that fell included Ciena (CIEN: down $3.01 to $56.67, Research, Estimates), which designs, manufactures and sells systems for fiber optic communications networks, and Corning (GLW: down $0.40 to $22.70, Research, Estimates).
One day after the semiconductor sector led a broad selloff in technology stocks, chip stocks edged lower again. Many market participants believe the semi sector will lead the broader technology market higher but early gains were erased by the end of the trading day.
The Philadelphia Stock Exchange's semiconductor index, which lists 16 chip and chip-equipment makers, slipped 15.55 points, or 2.47 percent, to 615.27.
Even chip leader Intel's (INTC: down $1.18 to $29.14, Research, Estimates) deal to buy three privately-held companies that specialize in components used in optical networking equipment did little to attract buyers.
Among those leading the way down, Applied Materials (AMAT: down $1.03 to $51.70, Research, Estimates), the No. 1 chip-equipment maker, faltered and shares of Applied Micro Circuits (AMCC: down $1.62 to $23.98, Research, Estimates) tumbled ahead of its first-quarter report.
Other chip-equipment stocks slipping included KLA Tencor (KLAC: down $0.37 to $50.23, Research, Estimates) and Teradyne (TER: up $0.58 to $35.80, Research, Estimates).
Those losses came after an industry trade group reported that chip-equipment makers booked 23 percent fewer orders in March than in February. That report, published by Semiconductor Equipment and Materials International, also said the three-month average of worldwide bookings in March was below the February level of $1.69 billion and 49 percent below the $2.55 billion in orders posted in February 2000.
But there could be a light at the end of the tunnel for the sector, despite mixed views by analysts as to when semis will head higher.
Prudential Securities analyst Shekhar Pramanick said in a note to clients Tuesday that the booking trends in the industry indicate that chip-equipment orders could bottom out in the July-September time frame.
"We believe we are in the second half of a semiconductor-cycle decline," Pramanick said. "The bias should be toward building positions while being price sensitive. We believe downside risk to equipment stocks is less than potential 12-18 month rewards."
Bucking the downtrend was Novellus Systems (NVLS: down $0.18 to $50.96, Research, Estimates), a leading supplier of equipment used to manufacture chips. Its shares advanced after it reported a first-quarter profit that beat analysts' expectations.
Meanwhile, shares of Compaq (CPQ: down $3.15 to $17.50, Research, Estimates) fell sharply after it reported its latest results and executives provided a bleak forecast for the current quarter.
After Monday's close, the No. 2 PC maker reported a first-quarter profit of 12 cents per share, narrowly missing Wall Street's lowered expectations. At the same time, executives said they expect second-quarter profit to fall to 5 cents per share. Prior to that, analysts had generally expected Compaq to log a second-quarter profit nearer 17 cents per share.
Shares of Dell Computer (DELL: down $3.50 to $25.85, Research, Estimates) †the No. 1 PC maker, fell in sympathy with its rival. Hewlett-Packard (HWP: down $1.54 to $29.42, Research, Estimates) shares also were down.
Shares of Gateway (GTW: down $0.03 to $18.01, Research, Estimates) bucked the downturn among PC makers.
Also on the rise were shares of IBM (IBM: up $0.67 to $112.67, Research, Estimates)† the world's largest computer hardware supplier.
The Goldman Sachs computer hardware index fell 18.62 points at 322.44, a 5.4 percent decline.
In the dot.com sector, shares of Amazon.com (AMZN: down $0.52 to $15.68, Research, Estimates) †the leading online retailer, sagged ahead of its latest quarterly results. After the market closed, Amazon posted a loss of 21 cents a share, edging slightly above its expectations.
Earlier this month, Amazon executives pre-announced the first-quarter results, saying they expect to post an operating loss of 22 cents per share on sales of about $695 million. Prior to that, analysts expected the company's loss to be nearer 30 cents per share on about $669.6 million in revenue.
Shares of Excite@Home (ATHM: up $0.02 to $3.89, Research, Estimates), a leading supplier of high-speed Internet and portal service provider, rose after it reported a wider-than-expected quarterly loss and announced a reorganization of its top management.
Other Internet stocks on the rise Tuesday included Earthlink (ELNK: up $0.65 to $11.55, Research, Estimates), the No. 2 Internet service provider in the U.S. and Web advertising firm DoubleClick (DCLK: up $0.42 to $11.18, Research, Estimates).
The Goldman Sachs Internet index faltered 4.95 points, or 3.7 percent, to 129.28.