Tech Sector Gloomy Following Big Earnings Day
By Eric Auchard
NEW YORK (Reuters) - Major U.S. makers of software, data storage, and communications chips were among the big names to report depressed results and grim outlooks on Wednesday, in the latest blow to markets wracked by anthrax and war fears.
A cross-section of top companies from the U.S. technology, media, and telecommunications sectors on Wednesday provided the broadest evidence seen so far that the U.S. technology slump is deep and getting worse.
Tom Seibel, outspoken chief executive and founder of Siebel Systems Inc. (Nasdaq:SEBL - news), the leading maker of customer sales and service software, summed up the troubles in a dire litany.
``Consumer confidence is down. Consumer spending is down. Industrial production has been declining. Payroll is down. Unemployment is up,'' he complained. ``We have synchronous recessions in Asia, Europe and the United States. It looks like things will be quite tough through the remainder of the year.''
Late Wednesday, Texas Instruments Inc. (NYSE:TXN - news), the world's No. 1 maker of computer chips for mobile phones, posted a third-quarter loss, warned of weak fourth-quarter sales, and said it was unable to predict when it would return to profit.
EMC Corp. (NYSE:EMC - news), the world's top maker of data-storage systems, reported its first quarterly loss in a dozen years and warned it did not expect to turn a profit until the second half of 2002. And AOL Time Warner Inc. (NYSE:AOL - news), the global media giant, said its third-quarter loss widened as results at its flagship America Online Internet unit disappointed some analysts.
NUMBERS TELL THE TALE
More proof came when Siebel posted third-quarter profits that fell by nearly 50 percent, to $35 million.
In recent weeks, technology investors had brushed off dark headlines and dismal outlooks to bid up sectors such as semiconductors, sensing that the worst downturn in the high-tech industry's decades-long history is nearing a bottom.
An index of 16 top chip stocks rose by 24 percent since Oct. 3, despite market jitters over anthrax that drove the Philadelphia Stock Exchange Semiconductor Index lower on Wednesday.
In a mixed message, Texas Instruments suggested that that an extended decline in semiconductor sales since the end of last year would bottom out in the fourth quarter, but declined to forecast when it would return to profitability.
``As things stand now, it appears that the third quarter will mark the bottom for orders, and the floor for revenue should be set in the fourth quarter,'' Tom Engibous, chairman, president and CEO of Texas Instruments, said in a statement.
``In a weak economic environment, it's hard to make a case that any near-term pick-up in demand for communications products is sustainable,'' SG Cowen semiconductor analyst Drew Peck said of Texas Instruments' results.
``We are getting close to a bottom but it looks like it's going to be a long, slow road back,'' Peck said, adding he would have to reduce his revenue estimates for the fourth quarter.
Celestica Inc. (CLS.TO) (NYSE:CLS - news), Canada's largest maker of electronics, said on Wednesday that third-quarter results hit the low end of previously lowered guidance, while economic conditions will force new restructuring in the fourth-quarter.
ALL IS NOT LOST
Still, there were selected bright spots in reports from some companies in sectors such as wireless services, computer security, and niche computer hardware plays.
Analysts have grown increasingly ebullient about computer security stocks, one of the isolated beneficiaries of heightened fears in the wake of the Sept. 11.
No. 4 U.S. wireless service company Sprint PCS (NYSE:PCS - news) added 1.2 million new subscribers during the third quarter, far above analyst expectations. Corporate computer reseller CDW Computer (Nasdaq:CDWC - news) said higher margins offset a drop in sales. Both stocks swelled higher on Wednesday in after-hours trading.
Earlier in the day, software security monitoring company Internet Security Systems Inc. (Nasdaq:ISSX - news) reported a third-quarter net loss after charges for acquisitions and restructuring. But it said fourth-quarter results would likely meet or exceed the top end of analysts' expectations.
Shares of Texas Instruments fell in after-hours trade on Wednesday, to $28.05. During the regular session, TI stock dropped $1.58 to end at $29.91 ahead of its earnings. Siebel dropped to $16.35 from its $17.38 regular session closing price on the Nasdaq stock market.
Other stocks that posted quarterly results late on Wednesday traded sideways or unchanged, including Apple Computer Inc. (Nasdaq:AAPL - news) and Advanced Micro Devices Inc. (NYSE:AMD - news).
Sprint PCS surged to $28 from the $26.45 price it closed at during regular session trading on the New York Stock Exchange (news - web sites), before it posted its results Wednesday afternoon. CDW Computer Centers Inc. rose to $45 from $42.65 in after-hours.
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Stocks Slump Amid Anthrax Scare
By Haitham Haddadin
NEW YORK (Reuters) - Stocks slumped on Wednesday as anthrax scares in Washington and New York stymied an early rally on upbeat profits from tech bellwethers like International Business Machines Corp.(NYSE:IBM - news).
Major market indexes began Wednesday on a positive note but fell after news that congressional buildings will be screened for environmental hazards amid deepening fears of biological attacks. The selling intensified in the late afternoon after chief White House economic aide Lawrence Lindsey said it was likely the U.S. economy will log two consecutive quarters of falling gross domestic product, defined as a recession.
``I don't think there's enough consideration given for the potential depth of the downturn to come,'' said Barry Hyman, chief investment strategist at broker-dealer Ehrenkrantz King Nussbaum. ``But a lot of the drop in the market is also the anthrax scare.''
Thirty-one congressional staffers tested positive for anthrax exposure on Wednesday, and Republican and Democratic leaders closed much of the U.S. Capitol complex in an extraordinary precautionary measure. New York State Gov. George Pataki said his Manhattan offices may be contaminated with the potentially deadly bacteria. Anthrax cases have popped up in Washington, D.C., New York City, Florida and Nevada.
The tech-laced Nasdaq Composite Index (^IXIC - news) shed 75.73 points, or 4.4 percent, to 1,646.34. The Dow Jones industrial average (^DJI - news) slumped 151.26 points, or 1.61 percent, to 9,232.97, after rising about 100 points at the open, and the broader Standard & Poor's 500 Index (^SPX - news) lost 20.45 points, or 1.86 percent, to 1,077.09.
The earnings news continued in earnest after the close.
Texas Instruments Inc. (TXN.N, the world's No. 1 maker of computer chips for mobile phones, posted a loss and its shares fell after-hours to $28.30 from a close at $29.91. Apple Computer Inc. (Nasdaq:AAPL - news) reported operating earnings that topped the previous quarter's results. But the computer maker warned the Sept. 11 attacks on the United States sharply slowed business and the company had lowered its financial outlook for the current quarter as a result. Apple rose to $17.13 in the aftermarket from a $16.99 close on the Nasdaq.
Wall Street jitters tempered an early rally sparked by two technology bellwethers. IBM, the world's largest computer company, surged to a session high of $106.40 and finished up $1.05 at $102.90 as the Dow component topped forecasts and said it was on track to meet quarterly estimates.
Intel Corp. (Nasdaq:INTC - news), the world's largest maker of computer chips, had also boosted sentiment for much of the session after matching forecasts. The Nasdaq heavyweight, which also is a Dow component, rose to $26.23, but succumbed to the late selling and fell 39 cents to close at $24.57. Intel posted a 77 percent tumble in quarterly profits that met forecasts.
It was the most actively traded stock on the Nasdaq.
Top banking companies Citigroup Inc. (NYSE:C - news) rose 47 cents to $46.56 and J.P. Morgan Chase & Co. Inc. (NYSE:JPM - news) climbed 66 cents to $34.60 -- both boosting the Dow. The companies posted sharp declines in profits as the sluggish economy and last month's attacks on New York battered revenues at their Wall Street businesses. But many on Wall Street thought the industry's results would be worse than they have been.
``The market got off to a good start, propelled by decent earnings from IBM, Intel, Citigroup and J.P. Morgan. As word spread of new discoveries of anthrax contaminations, the market began pulling back,'' said John Forelli, portfolio manager at Independence Investment. ``We're trying to get back to normal in a situation that is proving to be anything but.''
Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) offered a cautious economic outlook. The Fed chief, addressing Congress, said consumers and businesses have trimmed spending after the Sept. 11 attacks on the nation that left 5,400 people dead. He stressed the uncertainty of the immediate economic outlook, but expressed hope the economic impact has been a one-time and likely temporary event.
Stocks rose in the past three weeks on optimism over a handful of solid corporate results, lower interest rates and increased government spending. The market got a little ahead of itself, some pundits said.
``There is such a premium built in this market for it to bounce back faster and quicker than expected,'' Hyman said.
Many investors are convinced of an economic upturn in 2002 but are keeping up their guard amid the unnerving increase in anthrax cases and threats from Osama bin Laden (news - web sites), suspected of masterminding the September attacks.
``Now the anthrax scares are introducing an entirely new element of uncertainty that the nation, never mind the markets, is having difficulty assessing,'' Forelli said in a note. ``This situation doesn't fit in any economic or market models, so you are not sure if you should sit tight or run away.''
Investors did not respond kindly to all earnings reports, as they sold off from the start shares of bellwethers such as AOL Time Warner Inc. (NYSE:AOL - news), EMC Corp. (NYSE:EMC - news) or Ford Motor Co. (NYSE:F - news) -- companies that either delivered quarterly losses or warned of lackluster profits ahead. These shares fell between 3 percent and nearly 17 percent.
AOL Time Warner, the world's largest Internet and media company, fell $2.69 to $30.81 after reporting a wider loss.
EMC, the most active stock on the New York Stock Exchange (news - web sites), shed $2.24 to $11.21 after the world's top maker of data-storage systems reported its first quarterly loss in a dozen years. Ford lost 55 cents to $17.13 after the No. 2 automaker said profits would be under pressure in the fourth quarter and reported a third-quarter loss.
Dow stock International Paper Co. (NYSE:IP - news) fell $1.28 to $36.32, the world's largest forest products company, said earnings fell 74 percent due to company restructuring, low prices and lagging demand for its products.
Washington Mutual Inc. (NYSE:WM - news), the No. 1 U.S. savings and loan, said profits jumped 84 percent but it missed estimates. Shares fell 11 percent, or $4.09 to $33.01. |
