TELECOM STOCKS Sector lower on Tellabs, Qwest
By Jeffry Bartash, CBS.MarketWatch.com
Last Update: 1:38 PM ET June 20, 2001
NEW YORK (CBS.MW) - Shares of telecommunications stocks headed lower again on Wednesday in the wake of an earnings warning from Tellabs, a major phone equipment supplier.
In mid-afternoon action, Tellabs (TLAB: news, msgs, alerts) lost 25 percent to $15.99. The phone-equipment company said after Tuesday's close that it would barely break even in the second quarter, citing a plunge in sales as customers deferred purchases. See full story.
The news, while hardly a shocker, sent other telecom issues lower. Wall Street brokerages also issued a slew of downgrades.
One downgrade causing a stir: Morgan Stanley's cut in Qwest Communications, one day after the phone carrier soothed investors with the word that it will meet second-quarter financial targets.
Morgan Stanley, in a research report on Wednesday, questioned Qwest's accounting practices, saying the company "quietly" wrote off $2.1 billion in assets related to its purchase last year of US West.
Qwest immediately fired off a statement calling the brokerage's report "inaccurate and misleading" and reaffirmed financial projections for the rest of the year. See news release.
Still, Qwest (Q: news, msgs, alerts) fell 7 percent to $29.15 in heavy trading, which included several individual stock sales involving nearly 1 million shares. The company plans a conference call at 2 p.m. Eastern time to discuss the Morgan Stanley report.
Meanwhile, in recent trading, the American Stock Exchange's Networking Index, which represents large manufacturers, dropped 4.3 percent
The Nasdaq Telecommunications Index, which tracks younger equipment manufacturers and phone carriers, dipped 2.7 percent.
And big phone stocks, as measured by Standard & Poor's Communications Services Index, gave up 1.0 percent.
Among large equipment makers, Tellabs, Lucent Technologies, Nortel Networks (NT: news, msgs, alerts) and Alcatel (ALA: news, msgs, alerts) all hit 52-week lows. In Lucent's (LU: news, msgs, alerts) case, the company touched an alltime trough of $5.19.
On the upside, Juniper Networks (JNPR: news, msgs, alerts) clambered 4.5 percent higher to $29.83, breaking up a five-day losing streak. The company was upgraded on Tuesday to a "buy" from a "hold" by Needham & Co, but otherwise there was no major news. Cabletron Systems (CS: news, msgs, alerts) also edged higher.
Companies in the Nasdaq telecom index were divided, but the heavier action was on the downside. Level 3 Communications, JDS Uniphase (JDSU: news, msgs, alerts) , XO Communications (XOXO: news, msgs, alerts) and McLeodUSA (MCLD: news, msgs, alerts) were among the most active losers.
Level 3 (LVLT: news, msgs, alerts) continued to bleed in the wake of Monday's warning, shedding 20 percent to $4.14.
In the local phone sector, Verizon (VZ: news, msgs, alerts) , SBC Communications (SBC: news, msgs, alerts) and BellSouth (BLS: news, msgs, alerts) inched fractionally higher.
Long-distance stocks mostly declined, with midsized carriers such as Level 3, Williams Communications (WCG: news, msgs, alerts) and Broadwing (BRW: news, msgs, alerts) bearing the brunt.
AT&T (T: news, msgs, alerts) and WorldCom (WCOM: news, msgs, alerts) edged lower, though Sprint (FON: news, msgs, alerts) eked out a small increase.
Elsewhere, wireless stocks mostly advanced. Sprint PCS (PCS: news, msgs, alerts) rose 3.2 percent, with Nextel Communications (NXTL: news, msgs, alerts) up 2 percent.
Jeffry Bartash is a reporter for CBS.MarketWatch.com in Washington.
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