Alcatel Down 40%, Pulling Down Telecom
ADRs
Dow Jones Newswires
By Justin A. Oppelaar
NEW YORK (Dow Jones)--A steep dive in Alcatel's (ALA) American
depositary receipts has rippled through the entire ADR market on
Thursday, with fellow overseas telecommunications concerns taking the
most brutal drubbing, market contacts said.
The ADRs of Alcatel, a French telecommunications and engineering giant,
tumbled to a 52-week low Thursday after it warned that 1998 results
won't meet expectations, due mainly to troubles in Asia and Russia and
cuts in investment by telecom operators.
The resulting ripples affected financial markets around the world and left
many ADR-trading telecom concerns wondering what hit them, said Jim
Brophy, an ADR research analyst at BT Alex. Brown Inc.
The retreat in Alcatel ADRs "spilled over to the entire telecom group,"
Brophy said. "It was the trigger for a lot of weakness in France that's now
moving into the rest of Europe."
Among the hardest hit ADR issues was L.M. Ericsson Telephone Co.
(ERICY), which, like Alcatel, has exposure to switching markets, the
analyst added.
Ericsson ADRs recently changed hands at 18 3/8, down 1 9/16, or 7.8%,
after trading as low as 18 intraday.
The depression in telecom stocks pushed its way into the general ADR
population mainly because of the substantial influence of the sector on the
overall ADR market, Brophy said.
"Telecom is a major part of the volume for ADRs that we track," he
explained.
Earlier Thursday, Alcatel plunged to 18 9/16, past its previous 52-week
low of 21 1/2 set Oct. 28. The ADRs recently traded at 19, down 12
5/16, or 39.3%, on volume of 9.2 million, compared with a daily average
of 1.2 million.
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