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Techs ache as profits quake
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February 16, 1999: 7:17 p.m. ET
Investors edgy about Dell, HP surprises; AMAT and EarthLink delight Wall St.
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NEW YORK (CNNfn) - Lingering fears about stock valuations dampened sentiment in the technology sector Tuesday, before a flood of surprising earnings numbers came out after the bell and sent investors running for cover.
The tech-heavy Nasdaq Composite spiked early Tuesday amid a spate of bargain-hunting, then reversed course and ended with a loss of 7.96 points at 2,313.93.
The sector could get a jolt Wednesday in the wake of earnings reports after the bell by two PC vendors, an Internet service provider and a manufacturer of computer-chip equipment.
Applied Materials sees momentum
On the upside was the manufacturer of computer-chip equipment Applied Materials (AMAT), up 1 to 67-7/8, ahead of releasing better-than-expected profit it its latest quarter.
Applied Materials, of Santa Clara, Calif., posted net income of $229 million, or 60 cents per diluted share, in its first quarter ended Jan. 25, compared to net of $52 million, or 14 cents per share, a year ago.
Revenue shot up 76 percent to $1.3 billion. The company cited new momentum in orders and market share gains for its next-generation technology products.
On an operating basis, AMAT posted earnings of 11 cents per share, 5 cents ahead of analysts' consensus estimate, as reported by market tracking firm First Call Corp.
Meanwhile, EarthLink Network (ELNK), rose 4-3/16 to 67-1/4, before the nation's No. 4 Internet service provider posted a narrower-than-expected operating loss in its fourth quarter.
EarthLink, of Pasadena, Calif., posted a net loss of $22.5 million, or 89 cents per diluted share, for the period ended on Dec. 31, compared to a loss of $6.6 million, or 29 cents per diluted share, a year ago.
Total revenue soared 138 percent to $58.3 million. EarthLink cited partnerships with many Internet firms for a rise in incremental revenue. The company also added new clients through an acquisition of Sprint's (FON) Internet Passport customers.
Aside from one-time charges, EarthLink posted a operating loss of 17 cents per share, two cents ahead of the First Call estimate and narrower than 29 cents a year ago.
Elsewhere in the Internet space, theglobe.com (TGLO) added 1-1/8 to 49-1/4, before the Web community site operator said its net loss ballooned in the fourth quarter even though revenues soared about eight-fold as it lined up big-name advertisers like AT&T.
The New York-based company said its net loss rose to $4.5 million, or 53 cents per diluted share, in the quarter ended Dec. 31, on revenue of $2.8 million.
That compared to a net loss of $1 million, or 16 cents per share, on revenues of $355 million in the year ago period.
Mixed bag for Dell and HP
Two bellwether PC makers were under pressure Tuesday ahead of their release of their quarterly earnings results -- and the tumble looked set to speed up Wednesday.
Dell Computer (DELL) slumped 1-1/8 to 88-3/4, but its spill accelerated in after-hours trading following disappointing earnings and revenue numbers.
After the bell, Dell reported fiscal fourth-quarter earnings of 31 cents per share, in line with analysts' expectations, as compiled by First Call. Dell also announced a two-for-one stock split.
That was no help for its stock price, which tumbled more than 10 percent to 80 in after-hours trading Tuesday.
"So much of the market now is tied to PC demand and all of the other companies that produce equipment that either goes into a PC, into the box or the software which makes them run," Terence Gabriel, stock market strategist at I.D.E.A, said during midday trading.
"Dell's earnings are going to be very, very important here and I think what seems to be the critical factor here is the revenues," he said. "If they don't show $5.5 billion in revenues and pretty optimistic, positive comments about the coming quarters, we could have a problem."
Dell reported revenue of $5.2 billion in the quarter.
Dow component Hewlett-Packard (HWP) slipped 3-3/16 to 73-1/4 in New York Stock Exchange trading ahead of its quarterly profit announcement.
Despite beating analysts' targets for earnings, HP's top executive suggested revenue could come under pressure in the future. That caused its shares to fall to 70 in composite trading late Tuesday.
That came even though HP posted first-quarter earnings of 92 cents, 9 cents better than the analysts' targets, as reported by First Call.
Elsewhere in the sector, industry titan Compaq Computer Corp. (CPQ) fell 3/16 to 42-13/16 after announcing a merger with Zip2 Corp., a private provider of Internet platform solutions for local newspapers.
Compaq expects to roll Zip2's services into AltaVista, the Internet search engine that Compaq expects to spin off publicly later this year.
Deal-making rings for BellSouth?
Shares of the widely held Southeastern U.S. phone company BellSouth (BLS) rocketed up 4-13/16 to 49-1/2. Reports that the cellular phone unit of Otelo, a European joint venture in which the U.S. Baby Bell has a 22.5 percent stake, is in talks with Britain's Orange about a buyout.
Other regional Bell companies were quiet: U.S. West (USW) was unchanged at 59-7/8. Bell Atlantic (BEL) was up 1/16 to 57-7/8. SBC Communications (SBC) slipped 1/16 to 50-7/8, while Ameritech (AIT) climbed 1-13/16 to 62-3/4.
SBC and Ameritech, which are awaiting completion of a multibillion-dollar merger, put off plans for what they both called a "major" announcement set to take place with U.S. House Speaker Dennis Hastert.
In the software sector, Microsoft (MSFT) was down 1-1/2 to 156-1/4, plodding through another day of the government antitrust trial.
Among Microsoft's rivals, Oracle (ORCL) fell 3-1/4 to 53-7/16 and Sun Microsystems (SUNW), which formed a financing unit on Tuesday, was flat at 100-7/16. 
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