UPDATE 1-Ciena slide highlights fiber-optic damage
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(Recasts adding detail throughout, byline. All figures in
U.S. dollars)
By Susan Taylor
OTTAWA, March 12 (Reuters) - Shares in high-flying Ciena
Corp. sank as much as 21 percent on Monday as the
fiber-optic sector was hammered by renewed signs of slumping
demand amid an economic slowdown.
A cross-section of fiber-optic firms' stocks flirted with
new 52-week lows amid Salomon Smith Barney's sweeping cuts to
estimates for telecommunication equipment suppliers and the
latest earnings warning to hit the fiber-optic industry.
"The rapid falloff in U.S. economic activity in December
and January is still rippling through the international
economic backdrop," the Salomon report said, pointing to
declines in the Pacific Rim, Europe and Latin America.
That's bad news for companies that rely on international
markets for a substantial portion of their revenues.
Nortel, the world's No. 1 telco equipment manufacturer and
fiber-optic network equipment supplier, counts international
sales for 38 percent of its revenues, the Salomon report said.
Analyst Alex Henderson cut his 2001 earnings estimate to 60
cents per share from 68 cents, well below corporate guidance of
80 cents, and dropped his stock target to $35 from $55. He also
cut his 2002 earnings estimate to $1.00 from $1.10.
"We are forced to recognize the risk to the international
optical build rate," the report states. "We have also sharply
lowered our forecasts for wireless revenues reflecting the
continuing stream of cautious commentary."
Nortel shares shed more than 6 percent on Monday after it
was edged out of an $880.9 million fiber-optic contract by
Marconi Plc to upgrade British Telecommunications Plc's
network.
AIR ESCAPES HIGH-FLYERS
Salomon Smith Barney also cut its Ciena stock target to
$100 from $145, halved its Juniper Networks Inc.
target to $100, and dropped its ONI Systems Corp.
target to $60 from $95 while keeping earnings estimates for all
three companies.
"They take a big hit because their valuations are high and
there's a lot of air underneath them," Henderson told Reuters.
"It's a very difficult time to be a high-valuation stock."
Ciena was also affected by a Barron's article that
suggested a fiber-optic glut is hurting equipment manufacturers
such as Ciena, Sycamore Networks Inc. and Juniper.
Sycamore and Juniper shares, which both touched new lows on
Monday, posted a moderate recovery in early afternoon trade.
Sycamore was down about 5 percent, Juniper declined 7 percent,
and ONI Systems was off 9 percent.
"It's not a good day to be bullish on tech stocks," said
Mark Langley, an analyst at Epoch Partners. "On optical, I
would argue that the Barron's article and Oplink preannouncement
probably didn't help."
WARNINGS KEEP COMING
In another sign of waning demand, component supplier Oplink
Communications Inc. warned on Monday that its third
quarter would miss expectations as large customers cut spending
and worked through stockpiled inventory.
Shares in Oplink -- which supplies such network system
vendors as Nortel, Alcatel, and Lucent and component suppliers
such as JDS -- fell 18.5 percent.
The Salomon report also cuts estimates for JDS, which
counts international sales for 23 percent of its revenues. JDS
shares tumbled more than 9 percent in afternoon trade.
Analyst Tim Anderson trimmed his fourth-quarter estimate to
13 cents from 14 cents per share and cut his 2002 earnings
estimate to 63 cents per share from 70 cents. Anderson also
dropped his stock target to $45 from $55.
The report also cut estimates for Corning Inc. ,
which sells components and is the No. 1 vendor of glass cable,
amid growing uncertainty for the sector's growth. The stock
slipped 10.5 percent.
Estimates for the current year were cut to $1.31 per share
from $1.33 and to $1.65 from $1.68 for the next fiscal year,
while the stock target was dropped to $45 from $55.
The report, which cuts estimates for nine of the 14
companies surveyed and stock targets for 13 of those companies
follows a recent string of warnings and job cut announcements
from such technology titans as JDS, Nortel and Motorola.
($1=$1.55 Canadian)
REUTERS
Rtr 15:43 03-12-01 |
