Cisco earnings, Fed report boost markets
update NEW YORK--U.S. stocks rose for the first time in four days after a Federal Reserve report indicated the economy is expanding with little inflation. Computer-related shares led the gains, lifted by higher-than-expected profit from Cisco Systems.
The central bank's "beige book" report fostered optimism the Fed may not have to raise interest rates again soon, investors said.
"We had Cisco's earnings announcement coming after a very noticeable" decline in the stock market, said Henry Asher, president of Northstar Group. "That, with a beige book which was a little less negative than expected," triggered the rally in stocks.
The Nasdaq Composite Index, dominated by Cisco and other big computer companies, rose 74.87 to 2,564.98, its biggest intraday gain since June 16. The index had slumped 15 percent from its July 19 trading high through yesterday's low.
The Dow Jones Industrial Average gained 132.65 to 10,787.8, and the Standard & Poor's 500 Index rose 20.5 to 1,301.93.
Stocks rallied initially on Cisco's earnings and extended their gains when the Fed released its latest economic survey at 11 a.m. PT.
Intel, the biggest maker of semiconductors, rose 4.25 to 76.
America Online gained 6.38 to 91.38 after the company's president, Robert Pittman, briefed investors in a conference call along with Morgan Stanley Dean Witter analyst Mary Meeker.
"They portrayed that there are a lot of aspects to this company, that it's not a one-trick pony," said Marc Klee, comanager of the John Hancock Global Technology Fund, which owned 315,000 AOL shares at the end of April. "A third of their revenues come from nonsubscription sources. Advertising and e-commerce are big pieces of this pie."
Ariba, which helps businesses get into e-commerce, surged 17.88 to 107.88.
Red Hat, which sells a computer operating system that competes with Microsoft's Windows software, more than tripled in its first day of trading, gaining 39.88 to 52.88. Red Hat sells software and services that work with the free Linux operating system.
Some investors are betting stocks have fallen far enough
after a slump triggered by expectations the Fed will raise
benchmark interest rates to keep inflation from accelerating.
Yesterday, the S&P 500 fell more than 10 percent below its July
19 intraday high, the common definition of a correction.
''This market has been discounting an interest-rate hike,
and we're getting pretty near a bottom,'' said Peter Cardillo,
director of research at Westfalia Investments, a New York
brokerage.
The Fed said in its ''beige book'' survey that companies
report little evidence of rising wages and prices. Still, the
economy isn't slowing much, and there are more jobs than workers
available to fill them, the report said.
The yield on the 30-year U.S. Treasury bond, which moves
opposite from its price, fell 4 basis points to 6.21 percent. It
briefly touched 6.27 percent today, the highest since Oct. 28,
1997.
Retail Sales, Producer Prices
Investors are awaiting a report tomorrow on retail sales and
another Friday on producer prices for more insight into inflation
and the direction of interest rates in the world's largest
economy. Fed policy-makers raised rates a quarter-point to 5
percent June 30 to guard against higher prices.
Higher rates can be bad for stocks because investors measure
the potential gains offered by equities against the risk-free
returns offered by bonds and other fixed-income securities.
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Phone.com Jumps 30% After Its Software Is Chosen for Sprint PCS Phones
By Lisa Levenson
Phone.com Jumps 30% on Sprint PCS Wireless Internet (Update1)
(Updates with analyst comment, closing share price.)
Redwood City, California, August 11 (Bloomberg) -- Phone.com
Inc. shares rose 30 percent after Sprint Corp.'s PCS unit said it
will sell new wireless phones that use Phone.com's software to
access the Internet.
Shares of Redwood City, California-based Phone.com rose 19
3/8 to 84 1/8 in trading of 1.25 million shares, twice the two-
month daily average. Earlier, shares hit a high of 89; they have
more than quadrupled since they were offered at $16 each in June.
Sprint, the No. 3 U.S. long-distance telephone company, said
its PCS unit will use Phone.com's so-called ''microbrowser''
software to give customers Internet access from their wireless
phones. Sprint PCS said two new Web-browsing phones and the
Internet services will be available nationwide in September. The
company hopes the data services will entice customers to use
their phones more often, boosting their monthly bills.
''Today is a big day for sure because you have the first
mass-market, nationwide deployment'' of wireless data services,
Phone.com Chief Executive Alain Rossmann said. Phone.com is
benefitting from the emergence of a ''third kind of Internet,''
he said -- Internet in users' pockets.
''There's no other opportunity with the scope of what we're
doing,'' Rossmann said, noting that within three years market
researchers expect there will be 1 billion mobile phones in use
worldwide.
Marianne Wolk, an analyst at BancBoston Robertson Stephens
who rates Phone.com ''buy,'' attributed the shares' movement
today to Sprint's strong marketing capabilities.
''Clearly, the announcement is being received very
positively,'' she said. ''It leverages the investment by Sprint.
It's a pure play, by Sprint's efforts seen today. We would expect
similar wireless data service announcements from Nextel and AT&T
before year's end.''
Shares of Sprint, based in Westwood, Kansas, rose 2 7/16 to
48 3/16, while shares of Kansas City, Missouri-based Sprint PCS,
the third-best performing stock in the S&P 500 this year with a
139 percent gain, rose 1/8 to 55 3/8.
===================
Cisco Shares Rise After Company's 4th-Qtr Profit Surges on Internet Demand
By Scott Lanman
Cisco Shares Rise 7% After Surge in 4th-Qtr Revenue (Update7)
(Updates with closing share prices.)
San Jose, California, Aug. 11 (Bloomberg) -- Shares of Cisco
Systems Inc. rose 7.1 percent after the largest maker of Internet
equipment said fiscal fourth-quarter revenue rose 48 percent,
driven by sales to phone companies and small businesses.
Cisco climbed 4 3/16 to 62 15/16 in trading of 38.0 million
shares, making it the second-most active U.S. stock behind Intel
Corp., which rose 4 1/4 to a record 76. Other networking-related
companies also surged, including MMC Networks Inc., Juniper
Networks Inc. and Redback Networks Inc.
Cisco's revenue rose more than expected to $3.55 billion and
profit increased 29 percent as telecommunications companies
bought Cisco gear to update their networks for Internet and data
traffic. Cisco, whose market value exceeds that of competitors
Lucent Technologies Inc. and Nortel Networks Corp., boosted sales
growth at more than twice the pace of those rivals.
''It's very unusual to see a big company grow that fast,''
said Chris Stix, an analyst at SG Cowen Securities Corp., who
rates Cisco ''strong buy.''
Stix raised his fiscal 2000 and 2001 profit forecasts, each
by 5 cents a share. He sees earnings of 99 cents a share in the
year ending July 2000 and $1.25 in the following year.
Cisco's share increase today moved the company up two
notches among the most-valuable U.S. companies. It's now fifth
with a market value of $202.85 billion. That compares with
seventh for Lucent, which moved up one notch and has a value of
$193.79 billion. Nortel's market value is $56.37 billion.
Cisco surged to $100 billion in market value faster than any
other company, reaching that milestone last year.
Demand
Demand for high-speed Internet access through cable-
television and telephone lines is fueling sales of Cisco products
that route data on the Internet. It was the sixth straight
quarter that the San Jose, California-based company's growth
increased from the year-earlier period's.
''Electronic commerce and conducting business over the Web
is going to do nothing except grow,'' said analyst George Hunt at
Wachovia Securities, who raised his rating on Cisco to ''strong
buy'' from long-term ''buy.'' Hunt expects Cisco shares to reach
70 in 12 months.
Sales to telecommunications companies rose about 80 percent
in the latest fiscal year from the previous one, Cisco said.
Revenue from its other main markets, large corporations and small
businesses, increased by about a third each.
Chief Executive John Chambers said Cisco holds the largest
market share in 16 of its 20 product classes, citing industry
analysts. It's No. 2 in the other four, he said.
Growing Industry
Chambers expects industry sales to rise 30 percent to
50 percent a year ''in countries with strong economies.'' Cisco's
aiming to top the industry pace, though that would be
''challenging,'' he said.
''It was a very good quarter,'' said Stuart O'Gorman, who
helps manage $1.4 billion in U.S. equities for Scottish Equitable
in Edinburgh and is considering buying more Cisco shares.
Net income in the period ended July 31 rose to $635 million,
or 18 cents a share, from $493 million, or 15 cents, a year ago.
Both quarters include charges to write off in-process research
and development and acquisition costs. Without those costs,
profit was $727 million, or 21 cents a share, compared with
$525 million, or 16 cents.
Analysts polled by First Call Corp. expected profit of 20
cents a share excluding the costs. Some unpublished estimates
were as high as 21 cents.
During the quarter, Qwest Communications International Inc.,
the No. 4 U.S. long-distance phone company, agreed to buy as much
as $1 billion in equipment from Cisco in the next five years to
expand its nationwide data network.
Cisco also hopes to reap the rewards of a planned $1 billion
investment in the Internet-services business of KPMG LLP, the
U.S. unit of the No. 4 accounting firm. The companies disclosed
the agreement on Monday.
MMC Networks, which makes semiconductors for Cisco
equipment, rose 4 9/16 to 43 1/2. Juniper Networks, which makes
high-performance switches that compete with Cisco products, rose
14 7/16 to 185 3/8. Redback Networks, whose equipment makes it
easier for phone and cable companies to manage high-speed
Internet services, rose 16 1/8 to 186.
No. 1 semiconductor maker Intel yesterday completed its
purchase of networking-chip maker Level One Communications Inc. |
