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Techs regain some footing
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March 3, 1999: 5:04 p.m. ET
Analysts see cyclical correction, with 3Com top casualty as sector woes mount
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NEW YORK (CNNfn) - Tech stocks struggled to regain their footing Wednesday, after a networking company suffered the latest collateral damage from woes hitting the sector.
With the sector in a decided slump - some say a correction - in recent weeks, an analyst cited the advent of a "transition period" brought on by both the start of a new year and technological advances that consumers have been awaiting.
That comes against a backdrop of plunging prices for personal computers, which has put the squeeze on makers of just about every part found in a PC and the PC makers themselves.
The Nasdaq Composite closed at 2,265.20, down 6.17 points Wednesday. The tech-laden index is down 9.8 percent since hitting its high of 2,510.09 on Feb. 1.
Still, many analysts are optimistic, suggesting the turnaround doesn't mean that fundamentals are weak.
The recent tumble is just another bout of investors cashing in on a strong run late last year, said Al Goldman, chief market strategist with A.G. Edwards & Co. in St. Louis.
"It's a sign of the following: from the October lows, the Philadelphia Semiconductor Index is up 134 percent ... that's in four months, so it's a very normal spate of profit-taking," he said.
"The sector is notorious for over-reacting - both up and down - and now we are getting a little realistic," Goldman added. "But I think the buying opportunity is going to be sooner rather than later."
Tech wizard sees a cyclical dip
Megan Graham-Hackett, technology analyst with S&P Equity Group, cited a cyclical nature in the tech sector, which could be catching up with bellwether stocks, such as Intel Corp. Shares of the chip giant have tumbled 23 percent from its all-time high hit Jan. 20.
"At the beginning of the year, investors and industry analysts all worry -- is PC demand there? Is this the last year that we have 15 percent or better unit growth in PCs? That's what's impacting Intel's stock," she said.
Intel (INTC), which sank 7-1/4 Tuesday after a pair of analyst downgrades, bounced up 4-7/8 to 114-11/16 Wednesday.
Morgan Stanley analyst Mark Edelstone reiterated a "strong buy" rating on Intel shares, saying the stock is now trading at a discount.
Elsewhere among computer-chip makers, Advanced Micro Devices (AMD) lost 3/8 to 18-1/8, Micron Technology (MU) fell 1-7/8 to 52-3/8, while Texas Instruments (TXN) rallied, up 5-3/8 to 91-7/8.
Investor disconnect for 3Com
The big loser for a second day was 3Com (COMS), plummeting 2-7/16 to 24-9/16, or 9 percent, with a staggering 61.1 million shares trading hands, in the wake of an announcement late Tuesday it will fall far short of analysts' profit targets for its fiscal third quarter.
The networking equipment company said that lagging PC demand hurt its modem business and will cause sales to come in at $1.4 billion and net income at about 23 cents a share, both short of analysts' expectations. Analysts polled by First Call expected 3Com to report profits of 36 cents a share.
A half-dozen investment banks, such as CS First Boston, BT Alex. Brown, and Morgan Stanley Dean Witter, lowered their ratings on 3Com shares Wednesday.
But analysts didn't seem to believe 3Com's troubles would signal spill over for networking rivals.
Key rival Cisco Systems (CSCO), which analysts said has begun to nab some business away from 3Com, lost 9/16 to 95-1/8.
That came as Morgan Stanley Dean Witter analyst Chris Depuy reiterated his "strong buy" rating and a $135 price target on the stock, citing no change in business trends.
Elsewhere, Lucent Technologies (LU) rose 3-3/4 to 102-3/4 as Northern Telecom (NT) slipped 2-1/4 to 55-1/8.
Cool going for PC vendors
Highlighting a overall calm day for most PC vendors was Dell Computer (DELL), gaining 2-7/8 to 80-15/16. The PC vendor unveiled a new online shopping site called Gigabuys.com Wednesday.
The Round Rock, Texas-based leader in direct-to-customer retailing said it expects 70 percent of its sales to be carried out via the Internet.
Among the premier Dell rivals, Gateway (GTW) added 11/16 to 69-1/8 and Compaq (CPQ) rose 2 to 33-7/8.
Elsewhere, among Dow components, IBM (IBM) fell 1 to 166-3/4 and Hewlett-Packard (HWP), fresh off plans to split into two separate companies, slipped 3/16 to 68-13/16.
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