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Sprint woes plague telco sector
September 21, 2000 07:51 AM PT
by Thomas Coyle
NEW YORK -- Sprint's warning on Wednesday that its third-quarter earnings would fall short of the consensus estimate continued to plague telecommunications stocks, both in the long-distance and wireless spaces.
In an echo of Nokia's (NOK: -2.31, 41.38) market-roiling warning in mid- July of lower third-quarter earnings, Sprint (FON: -1.31, 25.50) said that it sees Q3 earnings of between 45 cents and 47 cents against First Call/Thomson Financial's estimate of a gain of 49 cents a share.
Differences of opinion
Despite the telco's troubles, brokerage Edward Jones raised its rating on Sprint PCS's (PCS: -2.44, 30.81) stock, which tracks Sprint's wireless business, to "strong buy" from "buy."
But not all brokerage houses agreed with Edward Jones' assessment. WR Hambrecht downgraded Sprint PCS to "buy" from "strong buy," and set a 12-month share-price target of $75.
"Given weaker than expected subscriber additions and higher than expected churn for Sprint PCS, the company's fundamental momentum has become somewhat clouded," read Hambrecht's research note on Sprint PCS. "Moreover, though we continue to expect to see Sprint PCS at or near the top of the domestic wireless services industry in terms of subscriber additions, the Company has its work cut out to meet or exceed its current Q4 guidance of 1.43 million subscriber additions."
Behind closed doors
AT&T (T: +0.19, 30.19) is holding its annual board retreat. Part of the agenda will no doubt be devoted to thinking of ways to restructure the giant telco. Some of the options open to it are ditching its consumer business, entering into a strategic relationship (or even a merger) with British Telecommunication (BTY: -4.31, 108.19), or buying wireless communications company Nextel (NXTL: +1.12, 45.44) to deepen the subscriber base of AT&T Wireless (AWE: +0.69, 22.62), its mobile unit. The last option might include an eventual spinoff of the wireless business. (See: "Get ready for Mum Bell.")
Chips slip
Semiconductors stocks traded lower, dragging the whole Nasdaq down along with them. D-RAM plays Intel (INTC: -1.38, 61.69), Advanced Micro Devices (AMD: -2.12, 27.56) and Micron Technology (MU: -2.69, 63.75) suffered despite recent upgrades. Semi equipment makers Applied Materials (AMAT: -4.12, 73.88), Lam Research (LRCX: -1.31, 24.31) and Novellus (NVLS: -3.75, 57.62) slipped markedly. And makers of chips for wireless devices -- Motorola (MOT: -0.44, 33.94) and Texas Instruments (TXN: -1.44, 58.56) for example -- were hobbled.
As with pure-play wireless stocks, analysts were hard-pressed to agree on the prospects for wireless chipmakers.
ABN Amro downgraded Texas Instruments (TXN: -1.44, 58.56) -- which said on Wednesday that the mobile phone industry might require fewer chips than anticipated -- to "outperform" from "buy," and cut its 12-month price target to $85 from $100.
Merrill Lynch meanwhile reiterated its near- and long-term "buy" rating on Texas Instruments.
Networkers
Stock in Cisco Systems (CSCO: -1.19, 61.94) traded hands more than any other issue on the Nasdaq in the early part of the session. With the exception of Network Appliance (NTAP: -4.00, 137.12), other computer networkers -- such as Brocade (BRCD: +3.78, 232.47), CacheFlow (CFLO: +5.00, 137.00) and 3Com (COMS: +0.12, 15.88) -- traded higher.
Gearmakers
W.R. Hambrecht & Co. praised ADC Technologies' (ADCT: +1.38, 33.81) plan to acquire Broadband Access Systems for $2 billion in stock. Reiterating its "buy" rating on ADC and setting a 12-month price target of $55 a share, the brokerage added, "We believe the acquisition is a strategic positive for ADC and adds to the growing portfolio of Broadband Access solutions across the cable, DSL, and wireless markets."
Lehman Brothers, an investment bank, reiterated its "buy" rating on communications gear maker Extreme Networks (EXTR: -3.44, 106.81), but it raised its 12-month price target for the stock to $120 from $90. |
