one more article about WAVC (again WSJ):
goto the last paragraph
Warnings, Analyst Moves
Sink Technology Stocks
By DANIELLE SESSA
WSJ.COM
NEW YORK -- Investors returned from an extended holiday weekend to crack the whip on some underperforming technology
issues. Earnings warnings from two software companies and a handful of analyst downgrades pressured tech stocks to their
widest lost in six weeks.
The Nasdaq Composite Index sank 128.83, or 3.2%, to close at 3863.10, while Morgan Stanley's high-tech 35 index dropped
50.28 to 977.53. The Dow Jones Internet Index fell 9.75 to 281.47.
Jump to a roundup of tech stocks including Entrust, Datastream, Oracle, JDS Uniphase, Lernout & Hauspie, WaveRider
Communications, and Novadigm
Heard on the Street: Computer Associates' Shortfall Pushes Investors to Sell Shares
U.S. Grants Tradepoint Direct-Trade Approval
Weakness in software, semiconductor and big-capitalization tech stocks caused the Nasdaq to post its biggest decline since May
23, when the index lost nearly 200 points to close at its low for the year of 3164.
Wednesday was the first full trading day of the third quarter, as the stock markets were open for a half-day of trading Monday and
closed Tuesday for the Independence Day holiday.
Trading got off to a fast start Wednesday as software stocks set off some fireworks of their own when two key companies issued
earnings warnings that raised concerns about the overall health of the software industry.
Computer Associates International announced in the wee hours of Tuesday morning that weak European sales, softness in its
mainframe business and delayed closures of several large deals would cause the software company to miss expectations for its
fiscal first quarter ended June 30 (see article).
Separately, BMC Software said Wednesday morning that weak mainframe software sales would produce earnings and revenues
short of analysts expectations for its fiscal first quarter (see article).
As a result of their shortcomings, Computer Associates and BMC shares were hammered Wednesday. On the New York Stock
Exchange, Computer Associated sank 21 1/2, or 42%, to 29 1/2, while BMC dropped 14 3/16, or 40%, to 21 5/16 on the Nasdaq
Stock Market.
Several Wall Street brokerages downgraded their ratings on Computer Associates. Goldman Sachs cut Computer Associates to
"market perform" from "market outperform" and Credit Suisse First Boston dropped its rating on the stock to "buy" from "strong
buy."
"The BMC conference call was almost a carbon copy of the CA call as for the reasons for the shortfall and outlook being guarded
and uncertain for both companies," said Chris Shilakes, Merrill Lynch e-commerce and enterprise software analyst. "They are
participants in the same kind of marketplace, still relying on the mainframe business as being a central driver. When the
mainframe business hits a stumbling block they are both going to feel it."
Mr. Shilakes wasn't surprised by the earnings warning from Computer Associates because enterprise-software companies tend
to have back-end loaded quarters, with many deals not coming together until the final weeks or days of the quarter, he said.
"For the last couple of years there has been some choppiness and it's been hard for the business to put together a consistent
series of quarters," said Mr. Shilakes, who has a "neutral" position on Computer Associates.
Earnings warnings from the software sector have continued to spook investors. Novell shares dropped 40% one day in early May
after the company said declines in channel sales and delays caused by the release of Microsoft's Windows 2000 cut into its
software revenues. One month later, Citrix Systems plunged 46% in a single session after it said that earnings would be lower
than expected because of changes in the ways it ships its software and delays in landing big orders from large corporations.
Meanwhile, semiconductor stocks were sharply lower after Salomon Smith Barney downgraded its rating on the sector to
"neutral" from "outperform," citing a slowdown in six to nine months caused by a peak in the capital-expenditure growth rate. The
Philadelphia Stock Exchange Semiconductor Index tumbled 9.3% to 1071.
Texas Instruments sank 5 1/8 to 63 7/8, Advanced Micro Devices lost 9 9/16 to 74 1/2, and National Semiconductor fell 8 3/16 to
49 15/16, all on the Big Board. Silicon Storage Technology declined 15 1/16, or 15%, to 83 15/16 on Nasdaq.
The semiconductor industry has been on a tear since late last summer: The demand for computer chips has been strong and
chip makers have been spending large amounts of cash to buy semiconductor capital equipment. The number of bookings for
capital equipment grew by 36% in the first quarter from the fourth quarter of 1999.
However, a recent trade association report showed that bookings in May grew by just 1%, a sign of sluggishness in the industry.
Some analysts foresaw a slowdown in the sector simply because since growth rates have been so large, chip makers would be
unable to spend enough money to sustain them.
Meanwhile, market leader Oracle slid nearly 10% to 72 5/16 on the Nasdaq after J.P. Morgan sliced its rating on the stock to
"market perform" from "buy." calling the resignation of the computer-database company's chief operating officer "extremely
negative" news.
Oracle shares have teetered since the software giant acknowledged last week that it hired a detective agency to investigate allies
of Microsoft. The company suffered another blow late Friday when it announced that Raymond J. Lane stepped down as chief
operating officer and president.
Shares of Oracle held firm during the tumultuous first half of the year for technology stocks. Interest-rate worries and valuation
concerns didn't affect the stock as much as other tech heavyweights. But corporate spying allegations and the departure of its
highly respected second in command has caused some on Wall Street to feel skittish about the stock.
Wednesday's Market Activity
Elsewhere in the technology sector Wednesday, Entrust Technologies plummeted 40 1/2, or 53%, to 36 5/8 on the Nasdaq Stock
Market. The transaction-security software firm warned that it expects second-quarter earnings to fall short of analysts' estimates
(see article).
Datastream sank 2 3/4 to 8 3/4 on Nasdaq. The company, which makes computerized maintenance management software and
business asset management systems for the automation industry, said it expects to report a loss for the second quarter of
between 25 and 30 cents a diluted share, excluding goodwill-amortization costs. Analysts were expecting a loss of nine cents a
share.
Lernout & Hauspie dropped 6 15/16 to 36 13/16 on Nasdaq. Fortis Bank cut its 2000 earnings outlook for the developer of speech
technology. A Fortis analyst said he has cut his 2000 profit forecast to 59 cents a share from 86 cents a share because of L&H's
conservative accounting standards concerning recent U.S. acquisitions Dictaphone and Dragon Systems. <br>
WaveRider Communications rose 1 5/8 to 8 9/32 on Nasdaq. The provider of fixed wireless access products began installing its
NCL135 communications products in China.
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