Here's some general news re: friday's trading activity:
TECH WATCH: SECTORWIDE
DIVE
TALK ABOUT a Freaky Friday. Leading tech stocks fell hard
in morning trading as poor earnings, trouble in Asia and
growing strength in the sub-$1,000 PC market combined to
spook investors. Disk-drive maker Western Digital (WDC)
was the downward catalyst when it preannounced that
second-quarter earnings would be in the 20-cent to 30-cent
range, well below consensus estimates of 85 cents a share.
Western Digital's woeful shares fell 24% to 23 1/16 in Friday
morning trading and the rest of the battered disk-drive sector
followed. Industry leader Seagate Technology (SEG)
dropped 5%, to 26 1/2. Interestingly, Quantum (QNTM) --
which looked to be the best-situated disk-drive maker going
forward -- fell 11% to 32, down from a 52-week high of 43
(see "Quantum Leap," Sept. 16).
Western Digital does a lot of business in Asia, but the real
culprit was weak pricing in the sector. Bear Stearns analyst
Andrew Neff lowered his rating on the stock to Neutral from
Buy, which says a lot given the valuations in this industry.
Western Digital, Quantum and Seagate Technology are all
trading at around nine times forward earnings. Few would
expect that it could get much worse.
In other tech news, semiconductor stocks are getting hit
across the board on news that LSI Logic (LSI), a maker of
integrated circuits, will reduce capital spending by up to 50%
next year. The early Friday announcement sent the stock
down 5%. One of our favorites, chip-equipment maker
Applied Materials (AMAT), was down 4% to 35.
Novellus Systems (NVLS), one of our "Ten Stocks for the
Year 2000 and Beyond," fell 2%.
While influential analysts like Merrill Lynch's Thomas Kurlak
keep expecting a 1998 slowdown in the semiconductor
capital-equipment industry, not everybody is so pessimistic.
The Information Network, an independent market-research
firm in Williamsburg, Va., just came out with a survey that
concluded there will be a 13.7% surge in worldwide demand
for capital equipment in 1998. That compares rather favorably
to this year's expected increase of 7%, says Information
Network's president, Robert Castellano. "Last year we
forecast a 8.2% increase for 1997, while firms like DataQuest
called for minus 15% growth," he says. "Next year should be
much better, and we are especially bullish on Applied
Materials."
-- By Eric Moskowitz |
