Phone Equipment Shares Fall on Concern Network Spending to Slow
Bloomberg News
September 30, 1998, 10:34 a.m. ET
Phone Equipment Shares Fall on Concern Network Spending to Slow
New York, Sept. 30 (Bloomberg) -- Shares of
telecommunications-equipment makers fell amid concern that phone
companies may cut spending after Northern Telecom Ltd. said
second-half revenue growth will be disappointing.
Northern Telecom fell 3 5/8 to 32 1/4 in midmorning trading,
while Lucent Technologies Inc. fell 3 1/2 to 71, Tellabs Inc.
fell 3 9/16 to 41 1/16, and Motorola Inc. fell 7/8 to 43 11/16.
Northern Telecom, the No. 2 seller of phone equipment in
North America, told analysts yesterday it's seeing slower demand
in Asia and Europe, echoing a similar forecast by France's
Alcatel SA. Analysts are concerned that demand for equipment for
phone networks could slow with economic crises in Asia, Russia
and Latin America.
''The risk is growing that phone companies will cut back on
spending,'' said Robert Wilkes, an analyst at Brown Brothers
Harriman. ''Nobody escapes a global slowdown.''
Shares of smaller equipment makers also fell amid concern
they could be the hardest hit as big phone companies push to buy
a wider range of products from fewer suppliers.
''As the trend moves to spend more with the big guys, money
shifts away from the smaller players,'' said Gregory Geiling, an
analyst at J.P. Morgan Securities Inc.
Smaller Company Declines
ADC Telecommunications Inc. fell 3 1/4 to 20 3/8, PairGain
Technologies Inc. fell 1 1/16 to 9, and Ciena Corp. fell 9/16 to
13 5/16.
Northern Telecom, which is 42 percent-owned by BCE Inc. of
Montreal, yesterday said that while revenue for the second half
won't meet estimates, earnings will be in line with expectations,
boosted by cost cuts and sales of more profitable products.
The Brampton, Ontario-based company isn't alone.
Two weeks ago, Alcatel warned that its profit won't meet
forecasts this year because of slower demand in Europe and Asia,
raising concerns that other equipment makers could face similar
troubles.
Earlier this month, Tellabs, of Lisle, Illinois, said third-
quarter sales and profit would be little changed from the
previous quarter.
Lucent, the top seller of phone equipment in North America,
said it's isn't seeing a slowdown and is taking market share for
Northern Telecom, Alcatel and Motorola.
--Andrew Brooks in New York through the Princeton newsroom (609) |
