(UPDATE) Investors Still Concerned About Outlook For Telecom-Equipment Makers
Dow Jones Online News, Wednesday, September 30, 1998 at 12:21
NEW YORK -(Dow Jones)- Northern Telecom Ltd.'s revenue warning
Tuesday carried over into the stock market Wednesday, with investors
unloading shares of telecommunications-equipment makers amid concerns
about the overall outlook for the industry.
NorTel (NT), whose shares dropped 12% Tuesday, fell another $5, or
14%, to $30.875 on volume of 7.7 million around midday. Tellabs Inc.
(TLAB), whose merger with Ciena Corp. went down the tubes, dropped
$5.375, or 12%, while shares of Ciena (CIEN), Alcatel SA (ALA) and Nokia
Oy (NOKA) also drew selling. Even Lucent Technologies Inc., which has
seen no signs of weakening demand, watched its stock drop $5.125, or
6.8%, to $69.375 in active trading.
Tuesday, Canada's NorTel said its revenue this year will fall short
of expectations, although it backed earnings projections for 1998 and
earnings and revenue views for 1999, clearing some confusion among
befuddled investors who earlier thought the company issued warnings for
both years. Wednesday, brokerage firms HSBC Securities and Warburg
Dillon lowered their investment ratings on NorTel's stock to neutral
stances, but lesser-known firm Edward Jones upgraded its stance to "buy"
from "hold."
Other telecom-equipment companies have issued warnings in recent
weeks. But market leader Lucent has said it sees no signs of weakening
demand and that it remains confident it will meet forecasts for revenue
and earnings.
French telecom-equipment and electronics concern Alcatel SA stunned
investors earlier this month by warning that earnings this year will
come in far below analysts' expectations. Motorola Inc. (MOT) has been
in the throes of a protracted slump, and smaller rivals Ciena and
Tellabs also have issued warnings.
Lucent, spun off from AT&T Corp. in 1996, said it currently has $18
billion in orders and is winning business away from competitors across
the board. Other rivals include Finland's Nokia Oy (NOKA) and Swedish
company Telefon AB L.M. Ericsson (ERICY).
And Cisco Systems Inc., the biggest maker of computer-networking
gear, has become a competitor as the voice and data-networking
industries rapidly converge. Lucent, Cisco (CSCO) and the other
companies are racing to develop gear that can handle voice, video and
data simultaneously. Lucent and NorTel are broadening their lines of
data-networking products in order to help telephone companies manage the
exploding streams of traffic.
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