Jittery Investors Resort to Sell-Off
New York, Jul 22, 2000 (123Jump via COMTEX) -- The U.S. stock market ended its
first losing week in a month after technology majors Agilent Technologies and
Ericsson forecast lower-than-expected profits ahead. All major indexes closed
lower on the news, as investors paid no attention to positive results posted by
many other companies. The Nasdaq Composite Index lost 90.71 points, or 2.1%, to
4093.85 Friday, while the Dow Jones Industrial Average shed 105.10, or 1%, to
10738.07. The S&P 500 slipped 14.89 to 1480.58. The Nasdaq fell 3.6% this week
and is up 0.6% for the year, while the Dow is off 0.7% for the week and down
6.6% for the year.
Macro-Economic Factors
The CPI, the government's most closely watched inflation yardstick, jumped 0.6%
last month, above the 0.4% rise expected by Wall Street. But the gains were
mostly caused by a surge in the price of gas and oil, which rose above $30 a
barrel last month. Excluding energy and food costs, the core CPI gained just
0.2%, in line with forecasts. The week also saw the second-tier release of
business inventories, which climbed 0.8% in May. Fed Chief Alan Greenspan, who
spoke before Congress this week, pointed out that consumer spending seems to be
slowing a bit but reiterated his concerns that a tight labor market, combined
with higher energy prices, might force the Fed to raise interest rates again.
Selected Earnings Announcements
Earnings dominated the markets this week. According to First Call, 55% of the
S&P 500 and Dow companies have reported results and, so far, only 8% of the
companies that have reported have fallen short of their consensus estimate.
Tech Stocks: Tech giant Microsoft (NASDAQ:MSFT) earned 44 cents per share in the
period beating estimates of 42 cents per share. IBM (NYSE:IBM) said that its
profit fell 19% to $1.9 billion, or $1.06 per share, compared with $2.4 billion,
or $1.28 per share, in the year-ago quarter. Apple Computer (NASDAQ:AAPL) topped
analysts' estimates in its third quarter, earning $200 million, or 55 cents per
share, on sales of $1.83 billion. Veritas (NASDAQ:VRTS) hurdled analysts'
estimates in its second quarter, earning $57.2 million, or 13 cents per share.
First Call Corp. consensus pegged it for a profit of 12 cents per share in the
quarter. Lucent Technologies (NYSE:LU) reported third-quarter earnings of $1
billion, or 30 cents per share, up from last year's profit of $732 million, or
23 cents, and a penny ahead of First Call's average estimate of 29 cents.
Qualcomm (NASDAQ:QCOM) posted pro forma earnings of $218 million, or 27 cents
per share, matching Wall Street expectations in the second quarter. Fiber-optic
equipment maker Corning (NYSE:GLW) reported earnings of $271.1 million, or 94
cents per share, beating expectations of 80 cents per share in the period.
Intel (NASDAQ:INTC) posted a profit of 50 cents per share, topping forecasts by
a penny. Advanced Micro Devices (NYSE:AMD) reported better-than-expected
second-quarter net income of $207 million, or $1.21 per share, compared to $79
million, or 53 cents per share, in last year's quarter. Analysts surveyed by
First Call had forecast a profit of $1.14 per share. Broadband chip maker
Broadcom (NASDAQ:BRCM) easily hurdled estimates with earnings of $57.4 million,
or 23 cents per share, on sales of $245.2 million. First Call Corp. predicted
earnings of 19 cents per share. Novellus (NASDAQ:NVLS), which makes the
equipment used in semiconductor manufacturing, reported earnings of 56 cents per
share, topping analysts' estimates of 52 cents per share. Lattice Semiconductor
Corp. (NASDAQ:LSCC) said quarterly profits rose 162% to $33.6 million, or 61
cents per share, compared to last year's $12.8 million, or 26 cents per share.
The consensus analysts' estimate was for a profit of 55 cents per share,
according to First Call. Xilinx (NASDAQ:XLNX) reported first-quarter earnings of
27 cents per share, two cents ahead of the First Call estimate.
Net Stocks: America Online (NYSE:AOL) reported earnings of 13 cents per share,
beating the consensus expectations of 11 cents. CNet (NASDAQ:CNET), reported pro
forma net income of $2.5 million, or 3 cents per diluted share, while the
average expectation of analysts surveyed by First Call was 1 cent per share.
Phone.com (NASDAQ:PHCM) posted a loss of 10 cents per share, crushing the
19-cent loss that analysts expected. Inktomi (NASDAQ:INKT) reported income of 4
cents per diluted share, edging past the expected figure of 2 cents. Alteon
WebSystems (NASDAQ:ATON) earned $7.4 million, or 16 cents per share, on record
sales of $51.5 million, blowing past the consensus forecast of 3 cents per
share. WebTrends (NASDAQ:WEBT) reported a second-quarter profit of $2.1 million,
or 7 cents per share, not counting one-time charges. First Call's survey of
eight analysts predicted a profit of 6 cents per share.
DoubleClick (NASDAQ:DCLK) reported a second-quarter net loss of $3.8 million, or
3 cents per share, not counting special charges. First Call's survey of 21
analysts predicted a loss of 5 cents per share. Commerce One (NASDAQ:CMRC)
reported a loss of 10 cents per share, 3 cents better than estimates. i2
Technologies (NASDAQ:ITWO) reported earnings of 10 cents per share, 2 cents
better than estimates. PurchasePro.com (NASDAQ:PPRO) lost $7.1 million, or 22
cents per share, on sales of $9.5 million, versus the expected loss of 30 cents
per share. RealNetworks (NASDAQ:RNWK) said earnings amounted to 6 cents per
share, a penny better than expectations. Go2Net (NASDAQ:GNET) reported fiscal
third-quarter net income of $10.1 million, or 22 cents per share, excluding
amortization. First Call's survey of 7 analysts predicted a profit of 15 cents
per share. Digital Island (ISLD) reported a fiscal third-quarter loss of $100.2
million, or $1.51 per share. First Call's survey of a dozen analysts predicted a
loss of $1.56 per share.
Exodus Communications (EXDS) reported a second-quarter net loss of $42.5
million, or 10 cents per share, not counting amortization. First Call's survey
of 34 analysts predicted a loss of 12 cents per share. About.com posted a
smaller-than-expected loss, losing $5.9 million, or 33 cents per share, compared
to analysts' estimates of 39 cents per share. Check Point Software (CHKP) posted
second-quarter earnings of $43.7 million, or 50 cents per share, compared to
analysts' estimates of 42 cents per share. Excite@Home (ATHM) lost $45.3
million, or 11 cents per share, versus expectations of 12 cents per share in the
quarter.
Finance Stocks: Citigroup (C) reported second-quarter net income of $3.01
billion, or 87 cents per share, up from $2.45 billion, or 71 cents, a year
earlier and beating the 83-cents-per-share expected by Wall Street. Merrill
Lynch (MER), the nation's biggest broker, reported net earnings of $902 million,
or $2.01 per share, up from $673 million, or $1.57 per share, a year earlier and
beating the $1.70 consensus forecast of analysts surveyed by First Call. Charles
Schwab (SCH) posted a second-quarter profit from operations of 14 cents per
share, meeting the First Call estimate. DLJdirect (DIR) registered a
second-quarter loss of 6 cents per share, wider than the loss of 3 cents
predicted by First Call. Wells Fargo (WFC) checked in with a second-quarter
profit of 63 cents per share, in line with the First Call estimate. Legg Mason
(LM) reported first-quarter earnings of 60 cents per share, matching the First
Call estimate.
Other Stocks: Auto major General Motors (GM) posted net income of $1.8 billion,
or $2.93 per diluted share, above expectations of $2.82 per share. Boeing (BA)
earned $654 million, or 75 cents per share, beating expectations of 66 cents per
share. Johnson & Johnson (JNJ) said its second-quarter profit rose to 94 cents
per share, 2 cents above Wall Street forecasts. Honeywell (HON) earned $605
million, or 75 cents per diluted share, in the second quarter, meeting lowered
forecasts. Philip Morris (MO) posted second-quarter earnings of 95 cents per
share, matching the First Call estimate. Coca-Cola (KO) earned $926 million, or
44 cents per share, compared with $942 million, or 38 cents per share, in the
year-earlier period, surpassing expectations of 40 cents. Sears Roebuck & Co.
(S) posted net income of $388 million, or $1.11 per share, surpassing the $1.05
per share estimate. Eastman Kodak (EK) earned $513 million, or $1.65 per diluted
share, from operations, meeting forecasts.
Selected IPOs During the Week
Support.com was the star IPO performer this week. The company's share price
increased by almost 135%. Airspan Networks followed close behind.
Ticker/Company Date Current Price IPO Price % Change
SPRT Support.com Inc. 07/19 32.88 14.00 134.82
AIRN Airspan Networks Inc. 07/20 30.00 15.00 100.00
VGNX Variagenics Inc 07/21 24.50 14.00 75.00
SMTXV SMTC Corp 07/21 25.38 16.00 58.59
DCGN Decode Genetics Inc 07/18 28.00 18.00 55.56
AGNT Argonaut Tech 07/19 22.88 15.00 52.50
TBIO Transgenomic Inc 07/18 21.94 15.00 46.25
TALR Talarian Corp 07/21 22.75 16.00 42.19
CRIO Corio Inc 07/21 19.69 14.00 40.62
VASC Vascular Solutions Inc. 07/20 16.50 12.00 37.50
ERJ Empresa Bras de Aeronautica 07/21 21.56 18.50 16.55
Major Events During the Week
Mergers/Acquisitions
Georgia-Pacific Corp. agreed to buy rival paper maker Fort James Corp. in a deal
valued at about $11 billion in cash, stock and debt. General Mills (GIS) agreed
to buy Diageo PLC's Pillsbury unit for $10.5 billion in stock and assumed debt.
CNet Networks (NASDAQ:CNET) announced that it is purchasing Ziff-Davis (ZD) for
$1.6 billion in stock, creating a leading technology information and services
company. Anesta (NSTA), the maker of cancer-pain treatments, agreed to be
acquired by Cephalon (CEPH) for approximately $444 million in stock.
Digital Island (ISLD) said it would buy SoftAware Networks for 9.375 million
shares of stock and $20 million in cash. Based on Digital Island's closing price
Monday, the deal is worth $438.4 million. General Electric Co. (GE) agreed to
acquire Harmon, which makes signal, inspection, control and communications
products used by railroads, for $30 per share in a stock deal worth about $425
million. Knight Ridder and Tribune Company said they have formed a new company,
which will purchase CareerBuilder.com for $8 per share in cash, or roughly
$190.4 million. The companies also teamed to acquire online recruitment firm
CareerPath.com. Cisco Systems (CSCO) took a $100-million investment stake in
Liberate Technologies (LBRT), making Cisco the third-largest investor in
Liberate. The companies also said they will co-market and sell software and
services to network operators under a non-exclusive agreement.
The Week Ahead
Earnings will continue to flood in next week and, according to First Call, 135
S&P companies and 8 Dow companies will report their results. Investors will look
forward to results by tech majors like Compaq, Amazon.com, Texas Instruments and
Applied Materials. Analysts expect Compaq (CPQ) is expected to show a profit of
21 cents per share, while Amazon.com (AMZN) is expected to post a loss of 35
cents per share in the quarter. Texas Instruments (TXN) is expected to post a
profit of 30 cents per share, while Applied Materials (AMAT) is expected to earn
68 cents per share.
Two key economic reports are due next week: the second-quarter employment cost
index, a broad measure of wages and benefits, and the advance reading of the
second-quarter gross domestic product. July consumer confidence and June durable
goods orders will also be released. In addition, Alan Greenspan will bring his
thoughts on the U.S. economy before the House Banking Committee on Tuesday.
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